Manual of Regulations on the Supervision of Financial Intermediaries - 1982 Book I

1975 MANUAL OF REGULATIONS ON THE SUPERVISION OF FINANCIAL INTERMEDIARIES - 1982 BOOK I BOOK I TABLE OF CONTENTS PART ONE ORGANIZATION, MANAGEMENT AND ADMINISTRATION A. SCOPE OF AUTHORITY SECTION 1101 Scope of Commercial Banking and Expanded Commercial Banking Authority 1101.1 Scope of expanded commercial banking authority 1101.2 Scope of commercial banking authority 1101.3 Banks and investment houses which may be granted expanded commercial banking authority 1101.4 Prerequisites to grant of authority 1101.5 Guidelines and qualification requirements for the issuance of an expanded commercial banking authority SECTIONS 1102-1105 (Reserved) B. CAPITALIZATION SECTION 1106 Minimum Capitalization 1106.1 Minimum capital for expanded commercial banks 1106.2 Minimum capital for commercial banks 1106.3 Consolidation of net worth of commercial bank and subsidiary investment house 1106.4 Minimum capital requirement for FCDU authority 1106.5 Sanctions SECTIONS 1107-1110 (Reserved) C. MERGER OR CONSOLIDATION OF BANKS SECTION 1111 Merger or Consolidation to Meet Minimum Capital 1111.1 Participants in merger or consolidation 1111.2 Requirement of Central Bank approval 1111.3 Rules on exchange of shares SECTIONS 1112-1115 (Reserved) D. NET WORTH TO RISK ASSETS RATIO SECTION 1116 Basic Ratio 1116.1 When lower ratio allowed 1116.2 Maintenance of averages 1116.3 Suspended application of ratio in case of merger or consolidation 1116.4 Definition/explanation of terms and phrases 1116.5 Required reports 1116.6 Sanctions SECTION 1117-1125 (Reserved) E. STOCK, STOCKHOLDERS AND DIVIDENDS SECTION 1126 Shares of Stock of Commercial Banks and Expanded Commercial Banks 1126.1 Transfer of shares 1126.2 Equity investments by foreigners in domestic banks 1126.3 Convertibility of preferred stock to common stock SECTIONS 1127-1130 (Reserved) SECTION 1131 Ceilings on Stockholdings in Commercial Banks and Expanded Commercial Banks 1131.1 Limits on stockholdings in a single bank 1131.2 Limits on stockholdings in several banks SECTIONS 1132-1135 (Reserved) SECTION 1136 Dividends 1136.1 Declaration of cash dividends 1136.2 When banks are prohibited from declaring cash dividends SECTIONS 1137-1140 (Reserved) F. DIRECTORS, OFFICERS AND EMPLOYEES SECTION 1141 Definition and Qualifications of Directors 1141.1 Definition of directors 1141.2 Qualifications of a director SECTION 1142 Definition and Qualifications of Officers 1142.1 Definition of officers 1142.2 Qualifications of an officer SECTION 1143 Disqualifications of Directors or Officers 1143.1 Persons disqualified to become directors 1143.2 Persons disqualified to become officers 1143.3 Disqualification procedures 1143.4 Effect of non-possession of qualifications or possession of disqualifications SECTION 1144 Bio-data of Directors or Officers SECTION 1145 (Reserved) SECTION 1146 Interlocking Directorships and/or Officerships 1146.1 Interlocking directorships 1146.2 Interlocking directorship and officership 1146.3 Interlocking officerships 1146.4 Representatives of government 1146.5 Categories of banks 1146.6 Definition of directors and officers SECTION 1147 Profit Sharing Programs for Directors, Officers and Employees SECTIONS 1148-1150 (Reserved) G. BANKING OFFICES SECTION 1151 Establishment/Relocation of Banking Offices 1151.1 Prior Monetary Board approval 1151.2 Citizenship requirements 1151.3 Capital requirements 1151.4 Other requirements/factors to be considered 1151.5 Condition precluding acceptance of application 1151.6 Conditions precluding processing of application 1151.7 Priority in processing 1151.8 Date of opening 1151.9 Relocation of banking offices SECTION 1152 Establishment of Money Shops 1152.1 Guidelines for establishment 1152.2 Other factors to be considered in the establishment of money shops 1152.3 Scope of operations SECTION 1153-1155 (Reserved) H. BANKING DAYS AND HOURS SECTION 1156 Banking Days and Hours 1156.1 Banking hours beyond the minimum 1156.2 Report of, and changes in, banking days and hours 1156.3 Emergencies 1156.4 Reports 1156.5 Existing authorizations and notifications 1156.6 Posting of schedule of banking days and hours SECTIONS 1157-1160 (Reserved) I. INTERNAL CONTROL SECTION 1161 Records and Reports 1161.1 Categories of, and signatories to, bank reports 1161.2 Sanctions in case of wilful delay in the submission of reports/refusal to permit examination 1161.3 Submission of certain required information 1161.4 Reports on crimes/losses 1161.5 Report on real estate transactions between a bank and its directors, officers, stockholders or any firm substantially owned by one or more of such directors, officers or stockholders 1161.6 Computation of "Due from CB" account for reporting purposes 1161.7 Reconciliation of head and branch transactions 1161.8 Statement of departmental profit and loss 1161.9 List of stockholders and their stockholdings 1161.10 Report on loans and other credit accommodations aggregating P1 million and above 1161.11 Central Bank offices where reports are submitted 1161.12 Manner of and deadline for submission of reports 1161.13 Consolidated financial statements of investor-financial institution and its subsidiaries/affiliates 1161.14 Report required of foreign subsidiaries/affiliates of domestic banks 1161.15 Report on outstanding equity investments in and outstanding loans to non-allied enterprises 1161.16 Report on the volume of and weighted average interest rates on deposits and loans 1161.17 Reports of extension offices SECTIONS 1162-1164 (Reserved) SECTION 1165 Audits 1165.1 Who may conduct 1165.2 Minimum coverage 1166.1 Proper accounting records 1166.2 Independent balancing 1166.3 Division of duties and responsibilities 1166.4 Joint custody 1166.5 Signing authorities 1166.6 Dual control 1166.7 Number control 1166.8 Rotation of duties 1166.9 Independence of the internal auditor 1166.10 Direct verification 1166.11 Other internal control standards 1166.12 Internal control procedures for dormant/inactive accounts SECTION 1167 Bank Protection 1167.1 Objectives 1167.2 Definitions 1167.3 Designation of security officer 1167.4 Security program 1167.5 Security devices 1167.6 Reports 1167.7 CB inspection SECTION 1168-1170 (Reserved) J. MISCELLANEOUS PROVISIONS SECTION 1171 Place of Board of Directors' Meetings SECTION 1172 Voting Requirements with Respect to Certain Corporate Transactions SECTION 1173 Articles of Incorporation and By-Laws SECTION 1174 Business Name SECTION 1175 Management Contracts of Banks SECTION 1176-1198 (Reserved) SECTION 1199 General Provision on Sanctions PART TWO DEPOSIT AND BORROWING OPERATIONS A. DEMAND DEPOSITS SECTION 1201 Authority to Accept or Create Demand Deposits SECTION 1202 Interest on Demand Deposits SECTION 1203 Reserves Against Demand Deposits SECTION 1204 Temporary Overdrawings; Drawings Against Uncollected Deposits 1204.1 Prohibition against temporary overdrawings 1204.2 Drawings against uncollected deposits (DAUDs) SECTION 1205 Checks Without Sufficient Funds SECTION 1206 Current Accounts of Bank Officers and Employees SECTION 1207-1211 (Reserved) B. SAVINGS DEPOSITS SECTION 1212 (Reserved) SECTION 1213 Interest on Savings Deposits SECTION 1214 Reserves Against Savings Deposits SECTION 1215 Servicing Deposits Outside Bank Premises 1215.1 Solicitation of deposits under the TIPID Movement 1215.2 Solicitation of deposits under the Barangay Savings Movement SECTION 1216 Withdrawals SECTION 1217 Dormant Savings Accounts SECTION 1218 Special Savings Deposits of Farmer-Borrowers SECTION 1219 Rental Deposits of Lessees. SECTIONS 1220-1222 (Reserved) C. NOW ACCOUNTS SECTION 1223 Authority to Accept NOW Accounts SECTION 1224 Interest on NOW Accounts SECTION 1225 Reserves Against NOW Accounts SECTIONS 1226-1229 (Reserved) D. TIME DEPOSITS SECTION 1230 (Reserved) SECTION 1231 Interest on Time Deposits SECTION 1232 Reserves Against Time Deposits SECTION 1233 Minimum Size and Term of Time Deposits SECTION 1234 Special Time Deposits SECTION 1235 Negotiable Certificates of Time Deposits 1235.1 Minimum features 1235.2 Insurance coverage 1235.3 Other requirement 1235.4 Negotiable certificates of time deposits of foreign branches of domestic banks SECTION 1236 Reserve Requirements SECTION 1237-1238 (Reserved) E. GOVERNMENT DEPOSITS SECTION 1239 Authority to Service Government Deposits 1239.1 Banks which may accept government funds 1239.2 Definition of terms 1239.3 Liquidity floor 1239.4 Exempt transactions 1239.5 Application for authority 1239.6 Sanctions SECTION 1240-1241 (Reserved) F. INTEREST ON DEPOSIT LIABILITIES SECTION 1242 Interest on Demand Deposits SECTION 1243 Interest on Savings Deposits and NOW Accounts SECTION 1244 Interest on Time Deposits 1244.1 Time of payment 1244.2 Treatment of matured time deposits 1244.3 Pretermination SECTION 1245 (Deleted) SECTION 1246 (Reserved) SECTION 1247 Employees' Provident Fund Contributions SECTION 1248 Disclosure of Effective Rates of Interest SECTION 1249-1252 (Reserved) G. RESERVES AGAINST DEPOSIT LIABILITIES SECTION 1253 Accounts Subject to Reserves; Amount Required SECTION 1254 Form or Composition of Reserves 1254.1 Allowable drawings against reserves 1254.2 Exclusion of uncleared checks and other cash items 1254.3 Interest income on reserve deposit with Central Bank 1254.4 Book entry method for reserve securities SECTION 1255 Computation of Reserve Position SECTION 1256 Reserve Deficiencies; Sanctions 1256.1 Chronic reserve deficiency; penalties 1256.2 Failure to cover overdrawings with the Central Bank 1256.3 Unpaid fines SECTION 1257 Report on Compliance SECTIONS 1258-1260 (Reserved) H. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS SECTION 1261 Schemes to Attract Deposits 1261.1 Raffles and lotteries 1261.2 Gifts or "giveaways" 1261.3 Other promotional schemes 1261.4 Sanctions SECTION 1262 Miscellaneous Rules on Deposits 1262.1 Specimen signatures 1262.2 Use of SEC-prescribed format for certification on deposit 1262.3 Insurance on deposits SECTION 1263 Booking of Deposits and Withdrawals 1263.1 Clearing cut-off time 1263.2 Definitions 1263.3 Booking of cash deposits 1263.4 Booking of non-cash deposits 1263.5 Booking of deposits after regular banking hours 1263.6 Other records required 1263.7 Notice required 1263.8 Reports required SECTION 1264 Unclaimed Balances SECTION 1265 Acceptance, Encashment of Negotiations of Checks Drawn in Favor of Commissioner of Customs SECTION 1266 Deposit Pick-Up Services SECTION 1267-1268 (Reserved) I. BORROWINGS FROM THE CENTRAL BANK SECTION 1269 Rediscount Ceilings; Eligibility of Papers; Maturities 1269.1 Rediscount ceilings 1269.2 Eligibility of papers 1269.3 Maturities SECTION 1270 Qualifications/Disqualifications for Availment, Penalties 1270.1 Qualifications for availment of credit facilities by commercial banks 1270.2 Suspension of rediscounting privilege SECTION 1271 Loan Values; Rediscount and Lending Rates for Preferential Rediscounting 1271.1 Loan values, rediscount and lending rates 1271.2 Scope/definition of preferential areas of rediscounting 1271.3 Maximum bank lending rate, defined SECTION 1272 Remittance of Collection; Repayments; Arrearages SECTION 1273 Rediscounting of Specific Papers 1273.1 Papers covering export products under the Export Priorities Plan of the Board of Investments 1273.2 Papers covering non-traditional exports/small-scale/cottage industries and the production/exports/trading of sugar, rice and tobacco 1273.3 Papers pertaining to agrarian reform credit relative to Presidential Decree No. 717 1273.4 Papers governing the Aromatic Tobacco Trading Loan Fund Program 1273.5 Paper of exporters of services and construction contracts 1273.6 Masagana 99 and Masaganang Maisan papers 1273.7 Papers covering pledges of blue chip/high grade shares of stock (bank borrowers' share holdings) 1273.8 Papers covering tax credit certificates 1273.9 Papers covering high priority projects against pledge of amortizations due within ten years 1273.10 Advances from CB secured by bank's share holdings 1273.11 Advances to commercial banks for sale/deposit of foreign currency notes/coins 1273.12 Papers pertaining to the Maisagana Program 1273.13 Papers covering the Consolidated Special Agricultural Rehabilitation Fund 1273.14 Promissory notes of corporate manpower exporters 1273.15 Papers resulting from domestic sales of raw/frozen tuna 1273.16 Papers of EKBs with banking units in areas inadequately served by rural banks 1273.17 Papers of qualified local congress organizers and professional associations sponsoring and/or organizing international conferences/conventions at the PICC 1273.18 Papers resulting from sales to the Central Bank of eligible or acceptable foreign currency notes/coins, and or deposits with the Central Bank of U.S. Dollar notes 1273.19 Papers resulting from sales of coconut oil to the PNOC by coconut oil mills/millers/desiccators. 1273.20 Papers of small corn farmers, corn plantations, corn traders and exporters SECTION 1274 Lender of Last Resort Facility of the Central Bank 1274.1 Nature of special credit accommodation 1274.2 Conditions of access 1274.3 Terms of the credit 1274.4 Quota 1274.5 Interest rates and sanctions SECTION 1275 (Reserved) SECTION 1276 Repurchase Agreements with the Central Bank 1276.1 R/P window for inventory financing SECTION 1277 Availment of Special Funds by the Philippine National Bank SECTION 1278 Records and Reports SECTION 1279 Special Credit Facility to Banks for CP-Committed Credit Lines Granted 1279.1 Nature of special credit accommodations 1279.2 Conditions to access 1279.3 Terms of the credit 1279.4 Ceiling SECTION 1280 Availments from the KKK Trust Fund with the Central Bank 1280.1 Releases from the Trust Fund 1280.2 Fund releases by Fundholders 1280.3 Substitution of Certificates of Time Deposit (CTD) 1281.3 Minimum features of deposit substitute instruments 1281.4 Prescribed instruments 1281.5 Physical delivery of securities 1281.6 Other rules and regulations governing the issuance and treatment of deposit substitute instruments SECTION 1282 Maturity; Matured and Unclaimed Deposit Substitutes SECTION 1283 Reserve Requirements 1283.1 Composition of reserves 1283.2 Computation of reserve position 1283.3 Reserve deficiencies 1283.4 Chronic reserve deficiency; penalties 1283.5 Report of compliance SECTION 1284 Minimum Trading Lot SECTION 1285 Yield/Interest Rates 1285.1 (Deleted) 1285.2 Time and payment of interest 1285.3 Interest/yield on preterminated deposit substitutes 1285.4 Sanctions SECTION 1286 (Reserved) SECTION 1287 Money Market Placements of Rural Banks 1287.1 Definition of terms 1287.2 Conditions required on accepted placements 1287.3 Sanctions 1287.4 Reporting requirements SECTION 1288 Transactions with Controlled Corporations SECTION 1289 Sundry Provisions on Quasi-Banking Functions 1289.1 Elements of quasi-banking 1289.2 Definition of terms and phrases 1289.3 Transactions not considered quasi-banking 1289.4 Preconditions for the exercise of quasi-banking functions 1289.5 Certificate of Authority from the Central Bank 1289.6 Issuance of Commercial Paper SECTION 1290 Without Recourse Transactions 1290.1 Prohibited practices K. OTHER BORROWINGS SECTION 1291 Borrowings from the Government SECTION 1292 Borrowings from Trust Departments or Investment Houses SECTION 1293 Deleted by Circular 1059 1293.1 Deleted by Circular 1059 1293.2 Deleted by Circular 1059 1293.3 Deleted by Circular 1059 SECTIONS 1294-1296 (Reserved) SECTION 1297 Issuance of Bonds 1297.1 Definition of terms 1297.2 Compliance with SEC rules on registration of bond issues 1297.3 Notice to Central Bank 1297.4 Minimum features 1297.5 Reserve requirements 1297.6 Applicability of certain regulations SECTION 1298 (Reserved) SECTION 1299 General Provision on Sanctions PART THREE LOANS, INVESTMENTS AND SPECIAL FINANCING PROGRAMS A. LOANS IN GENERAL SECTION 1301 Loan Limit to a Single Borrower 1301.1 Exclusions from loan limit 1301.2 Definition of terms 1302.3 Contingent liabilities included in loan limit SECTION 1302 Loan Proceeds 1302.1 Derivative/compensating deposits 1302.2 Acquisition of preferred shares SECTION 1303 Interest and Other Charges 1303.1 Rate of interest in the absence of stipulation 1303.2 Escalation clause; when allowable 1303.3 (Deleted) 1303.4 Floating rates of interest 1303.5 Accrual of interest earned on loans 1303.6 (Deleted by Circular 1021) 1303.7 Service fees and other charges on loans to land reform beneficiaries SECTION 1304 Past Due Accounts 1304.1 Accounts considered past due 1304.2 Demand loans 1304.3 Accrual of interest income 1304.4 Renewals/extensions 1304.5 Reporting requirements 1304.6 Restructuring or refinancing of loans 1304.7 Writing-off of loans as bad debts SECTION 1305 Truth in Lending Act Disclosure Requirement 1305.1 Requirement of disclosure 1305.2 Definition of terms 1305.3 Scope of requirements 1305.4 Inspection of contracts covering credit 1305.5 Information sheets and reports to be submitted to the Central Bank 1305.6 Posters 1305.7 Offices authorized to enforce rules and regulations 1305.8 Penal provisions B. SECURED LOANS SECTIONS 1306-1310 (Reserved) SECTION 1311 Loans Secured by Real Estate Mortgage 1311.1 Insurance on real estate improvements SECTION 1312 (Reserved) SECTION 1313 Increased Loan Values of Collaterals SECTION 1314 Loans Secured by Time Deposits SECTIONS 1315-1318 (Reserved) C. UNSECURED LOANS SECTION 1319 Loans Against Personal Security 1391.1 General guidelines 1391.2 Proof of financial capacity of borrower 1391.3 Amounts and terms of credit accommodations; renewals 1391.4 Signatories 1391.5 Collateral requirement 1391.6 Sanctions SECTIONS 1320-1325 (Reserved) D. LOANS AND OTHER CREDIT ACCOMMODATIONS TO DIRECTORS, OFFICERS, STOCKHOLDERS AND THEIR RELATED INTERESTS SECTION 1326 General Policy 1326.1 Definitions SECTION 1327 Transactions Covered SECTION 1328 Transactions Not Covered 1328.1 Applicability to credit card operations SECTION 1329 Direct or Indirect Borrowings SECTION 1330 Individual Ceiling SECTION 1331 Aggregate Ceiling; Ceiling on Unsecured Loans 1331.1 Applicability to branches of foreign banks SECTION 1332 Exclusions from Aggregate Ceiling SECTION 1333 Procedural Requirements SECTION 1334 Reportorial Requirements SECTION 1335 Availments of Credit Facility with the Central Bank SECTIONS 1336 Sanctions SECTION 1337 Financial Assistance to Officers and Employees 1337.1 Mechanics 1337.2 Funding by foreign banks 1337.3 Other conditions/limitations 1337.4 Reportorial requirements 1337.5 Sanctions SECTIONS 1338-1340 (Reserved) E. SPECIFIC TYPES/CLASSES OF LOANS SECTIONS 1341 Agrarian Reform and Agricultural Credit 1341.1 Definition of terms 1341.2 Who may borrow; purposes 1341.3 Required allocation for agrarian reform and agricultural credit in general 1341.4 Computation of loanable funds 1341.5 Allowable alternative investment 1341.6 Syndicated type of agrarian reform credit/agricultural credit 1341.7 Securities for loans 1341.8 Interest and other charges 1341.9 Submission of reports SECTION 1342 (Reserved) SECTION 1343 Interbank Loans 1343.1 Transfer tickets 1343.2 Accounting procedures 1343.3 Interest rate 1343.4 Call slips/tickets for 24-hour loans SECTION 1344 (Reserved) SECTION 1345 Supervised Credit 1345.1 Crop insurance SECTION 1346 Peso Borrowings by Foreign Firms 1346.1 General principles and policies 1346.2 Requirements/conditions for availment of peso borrowings 1346.3 Exemptions 1346.4 Definition of terms 1364.5 Procedural requirements SECTION 1347 Domestic Standby Letters of Credit (L/Cs) SECTION 1348 Committed Credit Line for Commercial Paper Issues 1348.1 Who may grant credit line facility 1348.2 Aggregate commitment 1348.3 Terms; conditions; restrictions 1348.4 Reports to the Central Bank 1348.5 Loan limit SECTION 1349 (Deleted) SECTION 1350 Loans to Rural Banks F. SPECIAL FINANCING PROGRAMS SECTION 1351 Industrial Guarantee and Loan Fund (IGLF) Program 1351.1 Accreditation system 1351.2 IGLF loans to small industries 1351.3 IGLF loans to medium-scale industries SECTION 1352 Masagana 99 and Masaganang Maisan 1352.1 Coordinating Masagana Program agencies 1352.2 Lending policies and procedures 1352.3 Incentive allowance to government agricultural credit production technician by the lending institutions 1352.4 Use of purchase orders or chits for the input portion of the loan to be extended to farmer-borrowers 1352.5 Valuation reserves for doubtful and loss loan accounts 1352.6 Financing by PNB of direct seeding scheme for rainfed areas under Masagana 99 1352.7 Guarantee payments of Masagana 99 arrearages SECTION 1353 (Reserved) SECTION 1354 Food Quedan Financing Program 1354.1 Objectives of the program 1354.2 Legal bases 1354.3 Terminology 1354.4 Statement of policies 1354.5 Responsibilities of participating agencies 1354.6 Food commodities in storage at the bonded warehouse of the Food Terminal, Inc. 1354.7 Guidelines on the use of food trust receipts under the Food Quedan Financing Program SECTION 1355 Cooperative Finance System 1355.1 Definition of terms 1355.2 General credit policies 1355.3 Types of financing 1355.4 Authorized lenders 1355.5 Eligible borrowers 1355.6 Credit requirements 1355.7 Amount of loan 1355.8 Loan periods; extension periods 1355.9 Collateral security; loan value 1355.10 Interest rates 1355.11 Loan repayment schedule 1355.12 Lending procedures 1355.13 Use of borrowed funds, diversion 1355.14 Application of payments; remittance to CB-CFG 1355.15 Default; foreclosure SECTION 1356 Aromatic Tobacco Trading Loan Fund and Other Tobacco Financing Programs 1356.1 Authorized commercial banks 1356.2 Eligible borrowers 1356.3 Eligible loans 1356.4 Special Time Deposits 1356.5 Lending procedures of commercial banks 1356.6 Rediscounting 1356.7 Liquidated damages 1356.8 Exemption from reserve requirements of STDs under the ATTLF 1356.9 Virginia and Burley Tobacco financing SECTION 1357 Cottage Industry Guarantee and Loan Fund (CIGLF) 1357.1 Definition of terms 1357.2 Participating financing institution 1357.3 Loans extended by participating financing institutions to borrowers 1357.4 Cottage Industry Guarantee operations 1357.5 Special Time Deposits (STD) 1357.6 Rediscounting 1357.7 Penalties SECTION 1358 Cotton Supervised Credit Financing Program 1982-1983 SECTION 1359 Copper Stabilization Fund Program 1359.1 Purpose 1359.2 Filing of applications 1359.3 Eligible borrowers 1359.4 Borrowing limit 1359.5 Release from the Fund 1359.6 Repayments to the Fund 1359.7 Other requirements 1359.8 DBP guidelines SECTION 1360 Kilusang Kabuhayan at Kaunlaran (KKK) Trust Fund SECTION 1361 Implementing guidelines governing the participation of bank under the expanded yellow corn production assistance program (EXCPAP) SECTION 1362 Implementing guidelines governing the participation of bank under the intensified rice production program in the provinces of Pangasinan, La Union, Ilocos Norte, Cagayan, Isabela, Nueva Viscaya, Nueva Ecija, Pampanga, Bulacan, Mindoro Oriental and Occidental, Camarines Sur, Iloilo, Leyte, Zamboanga Sur, Bukidnon, South and North Cotabato, Davao Norte and Sultan Kudarat. SECTION 1363 Implementing guidelines governing the Participation of Banks in Financing Post-Harvest Facilities for the Agricultural Productivity Programs of the Government. SECTION 1364-1375 (Reserved) G. EQUITY INVESTMENTS SECTION 1376 Scope of Authority SECTION 1377 Financial Allied Undertakings SECTION 1378 Limits on Investments in the Equities of Financial Allied Undertakings 1378.1 Investments in other financial intermediaries performing quasi-banking functions by expanded commercial banks with quasi-banking functions 1378.2 Investments in other financial intermediaries performing quasi-banking functions by commercial banks performing quasi-banking functions SECTION 1379 Non-Financial Allied Undertakings 1379.1 Extent of investments in non-financial allied undertakings SECTION 1380 Investments in Non-Allied or Non-Related Enterprises 1380.1 Non-allied undertaking eligible for investment by expanded commercial banks 1380.2 Limits on investments in non-allied enterprises 1380.3 Reporting requirements SECTION 1381 Other Limitations and Restrictions 1381.1 Expanded commercial banks 1381.2 Commercial banks 1381.3 Investment abroad SECTION 1382 Exclusion of Underwriting Exposure from Ceiling SECTION 1383 General Provisions SECTION 1384 Investment in Venture Capital Corporations (VCCs) 1384.1 Requirements for investors 1384.2 Authorized investments of VCCs 1384.3 Business name of VCC 1384.4 Reportorial requirements; examination by Central Bank 1384.5 Interlocks SECTIONS 1385-1387 (Reserved) H. OTHER OPERATIONS SECTION 1388 Purchase of Receivables and Other Obligations 1388.1 Yield on purchase of receivables 1388.2 Purchase of receivables on a "without recourse" basis 1388.3 Purchase of commercial paper SECTION 1389 Open Market Operations 1389.1 Exclusive transactions thru government securities dealers 1389.2 Marketing-making by government securities dealers 1389.3 Regular repurchase agreements with CB 1389.4 Reverse repurchase agreements with CB 1389.5 Overnight repurchase facility SECTIONS 1390-1392 (Reserved) I. MISCELLANEOUS PROVISIONS SECTION 1393 Investment-Deposit Ratio 1393.1 Statement of policy 1393.2 Methods of compliance 1393.3 Government securities as eligible investments 1393.4 Clarifications 1393.5 Sanctions for non-compliance 1393.6 Regional groupings 1393.7 Reporting requirements 1393.8 Grace period SECTION 1394 Assets Acquired in Settlement of Loans SECTION 1395 Credit Policies of Government-Owned Corporations SECTION 1396 Parcellary Plans on Crop Loans SECTIONS 1397-1398 (Reserved) SECTION 1399 General Provision on Sanctions PART FOUR TRUST AND OTHER FIDUCIARY FUNCTIONS A. TRUST OPERATIONS SECTION 1401 (Reserved) SECTION 1402 Scope of Trust Regulations 1402.1 Definitions SECTION 1403 Prerequisites for Engaging in Trust Business SECTION 1404 Security for the Faithful Performance of Trust Duties SECTION 1405 Non-trust Agreements SECTION 1406 Mergers and Consolidations SECTION 1407 Responsibilities of Administration 1407.1 Board of Directors 1407.2 Officers 1407.3 Committees; Officer-in-Charge SECTION 1408 Transactions Requiring Prior Authority SECTION 1409 Ceilings on Loans; Other Requirements SECTION 1410 Disposition of Accounts; Limitations on Loans and Investments SECTION 1411 Separation of Accounts SECTION 1412 Fees and Commissions SECTION 1413 Required Surplus SECTION 1414 Establishment of Common Trust Fund 1414.1 Trust plan 1414.2 Management of common trust funds 1414.3 Trustee as participant in common trust fund 1414.4 Exposure limit to single person/entity SECTION 1415 Miscellaneous Provisions 1415.1 Reports to trustor 1415.2 Reports to Central Bank 14 15.3 Audits 1415.4 NFA and ACA funds 1415.5 Borrowings from trust departments or managed funds of banks and investment houses 1415.6 Trust accounts with time deposits privileges SECTIONS 1416-1420 (Reserved) B. FUND MANAGEMENT SECTION 1421 Scope of Regulations 1421.1 Definition SECTION 1422 Responsibilities of Administration SECTION 1423 Minimum Features of Management Contract SECTION 1424 Authorized Investment; Prohibition 1424.1 Commingle of funds SECTION 1425 Separation of Accounts; Reports SECTION 1426 Fees and Commissions for Fund/Portfolio Management Services SECTION 1427 Security for Faithful Performance of Fund Management Duties SECTIONS 1428-1430 (Reserved) C. OTHER FIDUCIARY FUNCTIONS SECTIONS 1431-1498 (Reserved) SECTION 1499 General Provision on Sanctions PART FIVE FOREIGN EXCHANGE OPERATIONS SECTIONS 1501-1599 (Reserved) SECTION 1603 Clearing Operations 1603.1 Clearing regulations in general 1603.2 Inter-regional clearing operations in Visayas and Mindanao 1603.3 Treasury warrants 1603.4 Handling of checks drawn against out-of-town accounts SECTION 1604 Miscellaneous Operations 1604.1 Collection and paying agents of the SSS 1604.2 Collection of interest on government bonds and securities 1604.3 Depositary relationship arrangement 1604.4 Operation of cash dispensers 1604.5 Operation of armored cars SECTION 1605 (Reserved) B. SUNDRY PROVISIONS SECTION 1606 Bank Premises and Other Fixed Assets 1606.1 Expansion of bank premises 1606.2 Appreciation or increase in book value 1606.3 Ceiling on total investments SECTION 1607 Bank Advertisements SECTION 1608 Assessment Fees on Banks SECTION 1609 Reproduction and Use of Facsimiles of Government Securities, Currency Notes and Coins 1609.1 Facsimiles of government securities 1609.2 Facsimiles of Philippine legal tender and commemorative coins 1609.3 Facsimiles of Central Bank notes SECTION 1610 Collection of Fines from Banks SECTION 1611 Credit Information Exchange System 1611.1 Participating institutions 1611.2 Procedure for the exchange of credit information 1611.3 Available information 1611.4 Sources of information 1611.5 Costs SECTION 1612 Clean Note Policy SECTIONS 1613-1698 (Reserved) SECTION 1699 General Provision on Sanctions PREFACE This Manual of Regulations for Banks and Other Financial Intermediaries, approved by the Monetary Board as final authority under its Resolution No. 1421 dated July 30, 1982, shall constitute the Code of Central Bank Regulations. As such, it shall be the single source of all substantive regulations issued by the Monetary Board or the Governor of the Central Bank, and shall be cited as the authority for enjoining compliance with the rules and regulations embodied therein. For the present, only existing substantive rules issued by the Monetary Board or the Governor which are being implemented principally by the Supervision and Examination Sector (SES), are set out in four volumes with pertinent Parts and Sections in line with the arrangement and text of the Manual of Regulations on the Supervision of Financial Intermediaries which was issued as a systematic compilation of supervisory regulations in 1975. Regulations being implemented by the International Sector would subsequently form part of this Manual. The present volumes correspond to Book I Expanded Commercial Banks (EKBs) and Commercial Banks (KBs); Book II Thrift Banks (TBs); Book III Rural Banks (RBs); and Book IV Non-Bank Financial Intermediaries (NBFIs). The divisional features of the former Manual of Regulations which have been found valuable, such as the division of the Books into Parts indicative of the major operations of banks and NBFIs, and the further breaking up of Parts into major topics consisting of Sections and Subsections, were retained, and new and improved features were introduced to facilitate research. In addition to a comprehensive table of contents, an alphabetical subject/descriptive word index has been added at the end of each book. The financial reforms of 1980 which restructured the financial system are already reflected in this Manual. Furthermore, the substantive regulations in the Rules Governing Rural Banks (also in Manual form) are consolidated with the rules included in the original Book III of the Manual of Regulations which was published in 1975. The books were reorganized and revised as a project of the Commission on the Supervision of Financial Intermediaries (CSFI). The Office of Supervisory Policy and Regulations in coordination with the Office of the General Counsel and the Office of the Senior Deputy Governor undertook the further refinement of the Books towards conversion of the Manual into a single authority on the regulation or supervision of financial institutions. UPDATING INSTRUCTIONS MANUAL OF REGULATIONS FOR BANKS AND OTHER FINANCIAL INTERMEDIARIES The Manual of Regulations for Banks and other Financial Intermediaries contains existing regulations as of December, 1984. For purposes of updating the Manual as of December 31, 1985, the affected pages shall be removed and the updated pages shall be inserted as indicated: BOOK I Commercial Banks Manual Updated Pages Pages to be removed Pages to be Inserted Table of Contents xiii to xiv xiii to xiv xvii to xxii xvii to xxii xxv to xxviii xxv to xxviii a Part I 5 to 8 5 to 8 13 to 14 13 to 14 19 to 20 19 to 20 a 47 47 Part II 1 to 8 1 to 8 11 to 12.b 11 to 12.b 17 to 20 17 to 20 35 to 36.a 35 to 36.a 39 to 42 39 to 41 Part III 1 to 4 1 to 4.a 11 to 12 11 to 12.a 15 to 16 15 to 16.a 21 to 22 21 to 22.a 49 to 58 49 to 58.a 66.e to 66.f 66.e to 66.g 71 to 72.a 71 to 72.a Part IV 3 to 4 3 to 4.a 9 to 10 9 to 10.a Part VI 1 to 6 1 to 6.a 13 to 14 13 to 14.a Appendices 4-1 to 4-9 4-1 to Annex B-3 41-1 to 41-8 42-1 to 42-2 43-1 to 43-10 Index 1-7 to 1-8 1-7 to 1-8 1-13 to 1-16 1-13- to 1-16.a 1-19 to 1-20 1-19 to 1-20 INSTRUCTIONS TO USERS This Manual shall constitute the single source of all substantive rules governing the financial system of the country effective as of August 1, 1982. Presently, it is composed of the rules and regulations on the supervision of banks and non-bank financial intermediaries principally implemented by the Supervision and Examination Sector. It will subsequently include substantive regulations governing foreign exchange operations. cdlex The Manual, as the comprehensive authority on the specific subjects covered therein, shall be the basis for amending or repealing provisions incorporated in the Books. New rules shall immediately form part of the pertinent section or subsection of the Book affected so that the user shall no longer refer to a separate issuance, i.e., circular or memorandum, but shall instead cite the particular section or subsection of the Book as amended or repealed by the Monetary Board/Governor. Financial institutions regulated and supervised by the Central Bank shall comply with the provisions of the Manual and any violation thereof shall be punishable under its general provision on sanctions. As a code of regulations, the Manual contains the basic features of division into Parts, further subdivided into major topic headings which introduce the corresponding sections and subsections making up the provisions governing a major operation of the particular financial institutions. Parts and major topic headings as well as coded section numbers and headings are made uniform for all Books, with slight modifications in Book IV. Coding of sections utilizes four digits: the first digit refers to Book number, the second to Part number, and the last two refer to section numbers. All provisions for EKBs and KBs (contained in Book I), therefore, begin with number 1; 2 for TBs; 3 for RBs; and 4 for NBFIs.; Rules on Part One of Book I bear section numbers beginning with 11; those of Book II begin with 21, and so on for Books III and IV. For example, the code number 1161.6 would mean as follows: The coding of Book IV includes the letters "Q", "N" and "P" which are appended to the pertinent code numbers to indicate provisions for non-bank quasi-banks (NBQBs); non-bank financial intermediaries (NBFIs) and pawnshops, respectively. For example, the code numbers 4161Q, 4161N and 4161P would refer to provisions on reporting requirements of NBQBs, NBFIs and pawnshops, in that order. The paging is by Parts, with each Part beginning with page 1, and so on corresponding to the number of pages of the particular Part. For example, Part I, consisting of 6 pages will start with a first page indicated as "Part I-1" with "Part I-6" as its last page number. The pages for updates will follow the same pagination, with added letters to indicate inserted pages, in case of amendatory regulations with more provisions. Appendices for all Parts are found at the last portion of the Manual, before the subject index, and are numbered consecutively, by appendix number. Appendix 1 composed of 3 pages, for example, will begin with a page indicated as "App. 1-1" and end with "App. 1-3". To facilitate reference, running section headings consisting of the coded number(s) of section(s)/subsection(s) whose provisions are contained in a particular page are indicated at either the upper right or left-hand corner of the page preceded by the symbols or . The cut-off date, which is initially June 30, 1982, is indicated immediately below the running section heads, as: 82.06.30. Issuances for the month ended July 31, 1982 are included as temporary inserts. Thereafter, the date of the pages affected by subsequent new issuances or amendments/repeals will be changed to the end of the semestral period during the semestral updating which shall reflect the changes that shall have occurred. Amendments to the Manual will be issued as temporary inserts to facilitate dissemination. All amendments within a semester will be reprinted as regular inserts to replace affected pages or as additional pages in case of long amendatory provisions. APPENDICES NO . SUBJECT MATTER 1 Qualification and Documentation Requirements for the Issuances of an Expanded Commercial Banking Authority 2 (Reserved) 3 Format of Affidavit on Transfer of Stocks 4 Reports Required of Commercial Banks 5 Format Resolution for Signatories of Category A-1 Reports of Commercial Banks 6 Format Resolution for Signatories of Category A-2 Reports of Commercial Banks 7 Format Resolution for Signatories of Category B Reports of Commercial Banks 8 Certain Information Required from Banks and Non-Bank Financial Intermediaries 9 Documents/Information on Organizational Structure and Operational Policies 10 Format Certification on Compliance with the Rules and Regulations on Bank Protection 11 Tipid Movement Manual 12 SEC Prescribed Format for Certification on Deposit 13 Fourth Export Priorities Plan of the Board of Investments 14 Pro-forma Certification Covering Liquidation of Packing Credits Rediscounted with the Central Bank 15 Maximum Maturity of Loans from the Central Bank to Institutional Borrowers 16 (Reserved) 17 Samples of Standardized Instruments Evidencing Deposit Substitute Liabilities 18 New Rules on Registration of Short-Term Commercial Papers 19 SEC Rules on Registration of Long-Term Commercial Papers and Bonds 20 Implementing Guidelines of the Cotton Supervised Credit Financing Program, Crop Year 1982-1983 21 Format of Disclosure Statement on Loan/Credit Transaction (As Required Under Republic Act No. 3765, Truth in Lending Act) 22 Format of Abstract of "Truth in Lending Act" (Republic Act No. 3765) 23 Sample Forms for Interbank Loan Transfer Tickets 24 (Reserved) 25 Suggested Debt-to-Equity Ratio of Borrowing Foreign Firms 26 Suggested Annual Build-up Program of Borrowing Foreign Firms 27 List of Potential Small Industries for IGLF Financing 28 Rules of Regulations Issued by the Quedan Guarantee Fund Board Governing Guarantee Coverage of Grains Quedan Pursuant to Letter of Instruction No. 704 29 Regional Groupings of Provinces for Purposes of the Required Investment-Deposit Ratio of Commercial Bank Branches in a Region 30 Credit Priority Classification 31 List of Clearing Centers 32 Clearing Operations Between Regional Clearing Center and the Manila Clearing Center (Tarlac, Tarlac Used as Sample) 33 Procedural Guidelines for the Reproduction of Facsimiles of Government Securities 34 Procedures on Collection of Fines from Banks 35 Clean Note Policy 36 Guidelines and Procedures to Govern Verification of Currency Notes Deposited by Banks to their Demand Deposit Account with the Central Bank 37 Guidelines and Procedures to Govern Shipment of Unfit/Mutilated Currency Notes to the Central Bank, Cash Department, Regional Offices and Cash Units 38 Guidelines in the implementation of Circular No. 934 Regarding the Requirement to Purchase Government Securities for Branching purposes. 39 Guidelines on Food Quedan Financing Program for Food Terminal, Inc. (FTI) Deposits 40 Guidelines on the use of Food Trust Receipts under the Food Quedan Financing Program. PART ONE Organization, Management and Administration A. SCOPE OF AUTHORITY SECTION 1101. Scope of Commercial Banking and Expanded Commercial Banking and Authority . The following provisions shall govern the scope of and prerequisites to the grant of commercial and expanded commercial banking authority. SUBSECTION 1101.1 Scope of expanded commercial banking authority . An expanded commercial banking authority shall include, in addition to commercial banking powers enumerated in the immediately following section, the authority to exercise the powers of investment houses as provided in pertinent laws, the authority to invest in the equity of non-allied undertakings and to own up to 100% of the equity of a financial intermediary other than a commercial bank or a bank authorized to provide commercial banking services, in accordance with applicable laws and regulations. A commercial bank authorized by the Monetary Board to operate under an expanded commercial banking authority may perform the functions of an investment house either directly or indirectly through a subsidiary investment house; in either case, the underwriting of equity securities and securities dealing shall be subject to pertinent laws and rules and regulations of the Securities and Exchange Commission: Provided , That the expanded commercial bank cannot perform such functions both directly, or indirectly through a subsidiary; Provided, further , That if the investment house functions are performed directly by the commercial bank, such functions shall be undertaken by a separate and distinct department or other similar unit in the bank operating under an expanded commercial banking authority: Provided, finally , That a bank that avails itself of this option of exercising the powers of investment houses included in the expanded commercial banking authority indirectly through its subsidiary investment house may not directly exercise such powers as are exclusively reserved to investment houses. SUBSECTION 1101.2. Scope of commercial banking authority . A commercial banking corporation, in addition to the general powers incident to corporations, shall have all such powers as shall be necessary to carry on the business of commercial banking, by accepting drafts and issuing letters of credit, by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debts; by receiving deposits; by buying and selling foreign exchange and gold or silver bullion, and by lending money against personal security or against securities consisting of personal property or mortgages on improved real estate and the insured improvements thereon. It may accept or create demand deposits subject to withdrawal by check; offer NOW accounts; invest to the extent allowed under existing applicable law and regulations in equities of allied undertakings, whether financial or non-financial; and acquire readily marketable bonds and other debt securities. The term "commercial bank" shall include a bank that was authorized originally as a thrift or a rural bank and is subsequently authorized to provide commercial banking services which shall be subject to the provisions of existing regulations whenever they pertain to commercial banks except when the context thereof shall otherwise indicate. SUBSECTION 1101.3 Banks and investment houses which may be granted expanded commercial banking authority . Commercial banks, as well as government-owned and controlled banks, may be permitted by the Monetary Board to operate under an expanded commercial banking authority. An investment house existing as of April 1, 1980 may be converted into a commercial bank authorized to operate under an expanded commercial banking authority. An applicant bank which was not originally a commercial bank may be authorized to operate under an expanded commercial banking authority with or without change in its corporate name, provided that its articles of incorporation are amended to include its new powers. In the grant of this authority, the Monetary Board shall take into consideration the capability of the applicant in terms of its past performance as a bank or as a financial intermediary, financial resources and technical expertise. SUBSECTION 1101.4 Prerequisites to grant of authority a. Public offering of bank shares . The Monetary Board shall take into consideration the composition of holdings of equity ownership in the applicant bank. In addition to compliance with the provisions of Sections 12, 12-A, 12-B and 12-D of Republic Act No. 337, as amended, at least ten per cent (10%) of the minimum capital required for a bank seeking to operate under an expanded commercial banking authority shall be publicly offered under such terms and conditions as may be prescribed by the Monetary Board and listed in the stock exchanges. These requirements of public offering and listing shall be complied with by all applicant banks including those which, on their own or through merger with another bank or other financial intermediaries, may be able to meet the minimum capital requirement. b. Determination of competence, experience and adequacy of facilities . Among the factors that will be considered to determine competence, experience and adequacy of facilities of a bank applying for authority to provide commercial banking services, are: (1) liquidity, solvency and profitability prior to application; (2) past performance of management in the operation of the bank; (3) general compliance with banking laws, Central Bank rules and regulations, and policies and instructions of the Monetary Board; (4) managerial reorganization or potential capacity to provide international banking expertise: and (5) adequate staffing, equipment and other facilities to meet its expanded functions, including international correspondent bank relationship. SUBSECTION 1101.5 Guidelines and qualification requirements for the issuance of an expanded commercial banking authority . Qualified banks may submit their applications to operate as an expanded commercial bank to the Department of Commercial and Savings Banks (DCSB), supported by the following: a. Information and data showing the financial resources, past performances, banking facilities, etc., as called for in the guidelines; b. Project feasibility study on the proposed expanded commercial bank together with the required schedules; c. Copy of board resolution authorizing the merger/consolidation and/or other schemes to meet the minimum capital requirement; and d. Copy of board resolution authorizing the filing of the application and designating the official signatories. The qualification and documentation requirements for the issuance of an expanded commercial banking authority, as enumerated in Appendix 1, shall be complied with or submitted by banks applying for such authority. SECTIONS 1102-1105. (Reserved) . CAPITALIZATION SECTION 1106.1. Minimum Capitalization . The following provisions shall govern the amount of minimum capital requirements for expanded commercial banks and commercial banks. SUBSECTION 1106.1 Minimum capital for expanded commercial banks . A commercial bank applying for an expanded commercial banking authority shall have a minimum capital of P500 million. For purposes of this subsection, the capital shall refer to the total of the unimpaired paid-in capital (including paid-in surplus), earned surplus and undivided profits, net of (a) such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank, and (b) total outstanding unsecured credit accommodations, both direct and indirect, to directors, officers, stockholders, and their related interests (DOSRI). Any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of bank assets shall be excluded, except as otherwise provided for under Sec. 1111. The Board of Directors of the bank shall submit a copy of a resolution undertaking that no cash dividends shall be declared if, as a result thereof, the capitalization of the bank as above defined would fall at any time below P500 million. SUBSECTION 1106.2 Minimum capital for commercial banks a. All private commercial banks, including those that resulted from mergers or consolidations, existing as of August 22, 1980 with capitalization of less than P100 million, shall increase their paid-in capital to at least P100 million not later than September 30, 1980. In addition, the total of paid-in capital (including paid-in surplus), earned surplus and undivided profits, net of (1) such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank and (2) total outstanding unsecured credit accommodations, both direct and indirect, to directors, officers, stockholders, and their related interests (DOSRI) shall not be less than P100 million. Any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of bank assets shall be excluded. b. Commercial banks to be established after August 22, 1980, including those resulting from the conversion of thrift or rural banks and banks seeking authority to perform full commercial banking services, shall have a minimum capital of P300 million. For this purpose, the capital shall refer to the total of the unimpaired paid-in capital including paid-in surplus), earned surplus and undivided profits, net of (1) such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank, and (2) total outstanding unsecured credit accommodations, both direct and indirect, to directors, officers, stockholders, and their related interests (DOSRI). Any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of bank assets shall be excluded, except as otherwise provided for under Sec. 1111. SUBSECTION 1106.3 Consolidation of net worth of commercial bank and subsidiary investment house . For purposes of meeting the minimum capitalization requirement for expanded commercial banking authority, a commercial bank may be allowed to acquire up to 100% of the equity of an investment house and their combined capital shall be considered for purposes of the P500 million capitalization requirement: Provided , That the bank acquires at least seventy per cent (70%) of the paid-in capital and at least seventy per cent (70%) of the voting stock of the investment house: Provided, further , That if the investment house is not wholly owned by the commercial bank, the amount of the net worth of the investment house which may be consolidated with that of the commercial bank shall be limited to the amount equal to the percentage that the investment of the bank bears to the total net worth of the investment house. SUBSECTION 1106.4 Minimum capital, requirement for FCDU authority . The net worth (or combined capital accounts) of a private commercial bank with an authorized Foreign Currency Deposit Unit (FCDU), net of its unbooked valuation reserves and unsecured DOSRI loans, shall not be less than P150 million. Private commercial banks with an authorized FCDU whose net worth, net of unbooked valuation reserves and unsecured DOSRI loans, is less than P150 million shall comply with the minimum net worth requirement not later than September 30, 1980. SUBSECTION 1106.5 Sanctions a. If an expanded commercial bank fails to maintain its required minimum capital or if it fails to restore the same to the minimum amount required after having been required by the Monetary Board to do so, the Monetary Board may withdraw the expanded commercial banking authority granted to such bank or suspend certain aspects of such authority: Provided , That this is without prejudice to the imposition of such other sanctions which may include but need not be limited to those enumerated in Paragraph b hereof, as the Monetary Board may consider warranted under the circumstances: Provided, further , That where the bank concerned is one which meets the minimum capital required by virtue of the provisions of Subsec. 1106.3, both the bank and the subsidiary investment house shall be subject to the appropriate sanctions. b. Any or all of the following sanctions, among others, may be applied on any private commercial bank (i) which fails to comply with Subsec. 1106.2 until it attains the minimum capital requirement or (ii) having complied, shall fail to maintain thereafter such minimum capital requirement: (1) The privilege of branching shall be suspended; (2) No new unsecured loans to DOSRI shall be granted by the bank concerned; (3) No cash dividends shall be declared by the bank concerned; and (4) The privilege of dollar-peso swap with the Central Bank shall be suspended. c. The privilege of dollar-peso swap with the Central Bank shall not be available to private commercial banks which failed to comply with on September 30, 1980, and which fail to maintain thereafter, the minimum capital requirement for banks authorized to operate FCDUs or those authorized to accept foreign currency deposits under existing regulations. SECTIONS 1107-1110. (Reserved) . C. MERGER OR CONSOLIDATION OF BANKS SECTION 1111. Merger or Consolidation to Meet Minimum Capital . The merger or consolidation of banks and of a commercial bank and an investment house to meet minimum capital shall be allowed subject to the following regulations. cdlex SUBSECTION 1111.1 Participants in merger or consolidation . As a means of meeting the minimum capitalization requirement for a bank with expanded commercial banking authority or a commercial bank, the merger or consolidation of two or more commercial banks, or merger or consolidation of a commercial bank with a thrift bank or rural bank is hereby encouraged. The merger or consolidation of a commercial bank and an investment house for the purpose of performing expanded commercial banking functions is likewise hereby encouraged. The merger or consolidation of two or more thrift banks as a means of consolidating their resources to meet the paid-in capital requirement for a commercial bank or to enable it to perform commercial banking functions may be allowed. SUBSECTION 1111.2 Requirement of Central Bank approval . Bank mergers and consolidation including the terms and conditions thereof shall comply with the provisions of applicable law and are subject to approval by the Central Bank. Merging/consolidating banks should consult with the Central Bank before any merger/consolidation agreement is finalized. SUBSECTION 1111.3 Rules on exchange of shares . As a general rule, the ratio of exchange of shares between or among the participating banks and qualified non-bank financial intermediaries in a bank merger or consolidation shall be based on mutual agreement of the parties concerned. However, any appraisal surplus arising from the revaluation of the fixed assets, as may be agreed upon by the parties, shall be limited in the case of a merger or consolidation between banks, to bank premises, improvements, and bank equipment which are necessary for its immediate accommodation in the transaction of the bank's business. Such revaluation should be based on fair valuation of the property which shall be subject to review and approval by the Central Bank. SECTIONS 1112-1115. (Reserved) . D. NET WORTH TO RISK ASSETS RATIO SECTION 1116. Basic Ratio . The net worth (or combined capital accounts) of a bank shall not be less than an amount equal to ten per cent (100%) of its risk assets as herein defined: Provided, however , That the Monetary Board may authorize a bank to maintain a net worth to risk assets ratio lower than ten per cent (10%), subject to the conditions in Subsec. 1116.1. The Monetary Board may subsequently raise a ratio but such upward adjustment shall be made effective only after a reasonable period of time. SUBSECTION 1161.1 When lower ratio allowed . If a bank has a capital as defined in Subsec. 1106.1 of at least P500 million, it may be authorized to maintain a net worth to risk assets ratio of eight per cent (8%). A bank may further be authorized to maintain a lower net worth to risk assets ratio of six per cent (6%) if its net worth averages at least P700 million and it complies with such other conditions or requirements as the Monetary Board may prescribe. SUBSECTION 1116.2 Maintenance of averages . The average figures for net worth mentioned in Subsec. 1116.1 shall be based on the end-of-month balances for twelve (12) successive months immediately preceding the grant of authority to maintain a lower ratio. Thereafter, if the average figures fall below the required amounts/ratios for at least two (2) consecutive months, the Monetary Board may require the bank concerned to maintain the corresponding higher net worth to risk assets ratio-prescribed in these regulations: Provided , That the upward adjustment in the ratio shall take effect not earlier than ninety (90) calendar days from the date of the Monetary Board decision. SUBSECTION 1116.3 Suspended application of ratio in case of merger or consolidation . If, in the process of a bank merger or consolidation, the resulting bank is unable to comply fully with the net worth to risk assets ratio prescribed under these regulations, the Monetary Board may, at its discretion, temporarily relieve the bank from full compliance with such ratio under such conditions as the Monetary Board may prescribe. SUBSECTION 1116.4 Definition/explanation of terms and phrases a. Risk assets . "Risk assets" is defined as total assets minus the following assets: (1) Cash on hand; (2) Amount due from the Central Bank; (3) Evidences of indebtedness of the Republic of the Philippines and of the Central Bank, and any other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines. As approved by the Monetary Board, such evidences of indebtedness or obligations subject of repurchase or resale agreements may be deducted by both the selling/borrowing and buying/lending banks; (4) Loans to the extent covered by hold-out on, or assignment of, deposits maintained on the lending bank and held in the Philippines; (5) Loans or acceptances under letters of credit to the extent covered by margin deposits; (6) Bank premises, depreciated; (7) Furniture, fixtures and equipment, depreciated; (8) Balances maintained with the Philippine National Bank or any of its branches for clearing checks drawn on banks located in places not serviced by the Central Bank clearing offices; (9) Amounts due from foreign banks representing normal working balances in currencies eligible as part of the international reserve (and not maintained in the form of savings, time or fixed deposits), but not to exceed thirty per cent (30%) of outstanding regular sight letters of credit; Provided, however , That amounts earmarked from balances of due from foreign banks to fund cash letters of credit should be considered non-risk assets in its entirety; ( Effective Jan . 18, 1985 ). (10) Portions of special time deposit loans covered by Industrial Guarantee and Loan Fund (IGLF) guarantee: (11) Real estate mortgage loans insured by the Home Financing Commission (HFC) to the extent of the amount of the insurance or the outstanding loan, whichever is lower; (12) Loans to the extent secured by Central Bank Certificates of Indebtedness and other assets listed in Item (3) above; (13) Loans to the extent covered by hold-out on, or assignment of, deposit substitutes maintained in the lending bank and held in the Philippines; and (14) Loans to the extent guaranteed by the Philippine Export and Foreign Loan Guarantee Corporation which are not past due; and (15) Deferred income tax. ( Effective April 23, 1985 ). The following assets held by foreign branches of domestic banks shall be considered as non-risk assets for purposes of computing the minimum capital required under Section 22 of Republic Act No. 337, as amended: (1) Cash on hand in currencies acceptable as part of the Philippine international reserves; and (2) Investments in bonds/securities denominated in foreign currencies which form part of the Philippine international reserves, the repayment and servicing of which are fully guaranteed by the issuing government of the country where the banking office is located. b. Total assets . For this purpose, the term 'total assets' shall exclude the following: (1) All Trust Department accounts; (2) Unutilized portions of letters of credit; and (3) All contingent accounts. c. Networth (or combined capital accounts) . For domestic banks, 'networth' for purposes of this section shall mean the total of the unimpaired paid-in capital, earned surplus and undivided profits, net of deferred income tax, and such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank; and excluding any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of bank assets, except in such cases as may be authorized by the Monetary Board. For foreign banks presently having branches and agencies in the Philippines which may elect in accordance with the options granted to them under Section 68 of Republic Act No. 337, as amended, either: (1) to assign capital permanently to the local branch with the concurrent maintenance of 'Net Due to Head Office' account, or (2) maintain a 'Net Due to Head Office' account, the 'networth' or combined capital accounts shall mean the total of the assigned capital, if any, and net due to head office account which shall include all net amounts due to other branches outside the Philippines account, net of deferred income tax and such valuation reserves and other capital adjustments as may be required by the Central Bank. ( Effective April 23, 1985 ). For purposes of computing the prescribed ratio of net worth to risk assets, equity investments of a bank in another bank or enterprise, whether foreign or domestic, shall be deducted from its net worth if the other bank or enterprise has a reciprocal equity investment in the investing bank, in which case the investment of the bank or the reciprocal investment of the other bank or enterprise, whichever is lower, shall be deducted from the net worth of the bank. d. Cash on hand . This refers to total cash held by the bank consisting of both notes and coins in Philippine currency and in such foreign currencies acceptable as part of the international reserves. e. Amount due from the Central Bank . This refers to all deposits of the reporting bank with the Central Bank of the Philippines. f. Loans to the extent covered by hold-out on or assignment of deposits or deposit substitutes maintained in the lending bank and held in the Philippines . (1) A loan shall be considered as secured by a hold-out on or assignment of deposit or deposit substitute only if such deposit or deposit substitute account is covered by a hold-out agreement or deed of assignment signed by the depositor or investor/placer in favor of the bank and maintained in the lending bank and hold in the Philippines. (2) The amount deductible from total assets shall be the outstanding balance of the loan to the extent covered by the corresponding hold-out on or assignment of deposits or deposit substitutes signed by the depositor or investor/placer in favor of the bank. (3) Loans transferred to/carried by the bank's trust department (secured by deposit hold-out/assignment) are not deductible items. g. Loans or acceptances under letter of credit to the extent covered by margin deposits (1) Unnegotiated letters of credit or the unutilized portion thereof, or other items booked under contingent accounts are not deductible items. Only the amount of loans or acceptances (real account) negotiated under letters of credit to the extent covered by the corresponding margin deposits shall be considered as deductible item. (2) Margin deposits against loan or acceptance accounts which are fully liquidated shall not be deductible items. h. Bank premises, depreciated . This refers to the cost of the bank premises, including land owned by the bank, less the accumulated depreciation thereon. Properties used as bank premises purchased by the bank in foreclosure or execution sale shall not be considered owned by the bank until title is consolidated in the bank. i. Furniture, fixtures and equipment, depreciated . This refers to the cost of furniture and fixtures, including equipment, owned by the bank, and used for its banking operations, less the accumulated depreciation thereon. j. Deferred income tax . This refers to the accumulated balance of income tax expense deferred in view of certain expenses or provision for losses not currently deductible for income tax purposes. ( Effective April 23, 1985 ) SUBSECTION 1116.5 Required reports . All banks concerned shall compute every business day their capital required and capital accounts and shall submit a report thereon on a weekly basis to the appropriate supervising and examining department of the Central Bank in such reporting form and on that day of the week as may be prescribed in pertinent issuances of the Central Bank. Report of compliance with the statutory net worth to risk assets ratio shall cover only banking days when the reporting bank is open for business excluding Saturdays and Sundays. Banks may leave blank the Saturday and Sunday columns of the following reports. Consolidated Daily Report of Condition (CBP 7-16-01 for commercial banks) and Statement of Capital Required and Capital Accounts under Section 22 or 30 of Republic Act No. 337, as amended (CBP 7-16-07 for commercial and specialized government banks), for banks not yet adopting the CDRC. Banks are enjoined to maintain suitable records to facilitate verification of the required capital accounts. SUBSECTION 1116.6 Sanctions a. The Monetary Board may, whenever warranted, impose the additional sanctions on any erring bank provided under Section 22 of Republic Act No. 337, as amended. b. The Monetary Board may also impose sanctions on any bank if the required periodic reports to the Central Bank on this matter contain recurring material errors or inaccuracies. SECTIONS 1117-1125. (Reserved) E. STOCK, STOCKHOLDERS AND DIVIDENDS SECTION 1126. Shares of Stock of Commercial Banks and Expanded Commercial Banks . The following shall govern transactions affecting shares of stock of commercial banks and expanded commercial banks. SUBSECTION 1126.1 Transfer of shares a. Transfer and acquisitions of shares within a family group . Transfers of ownership of shares of stock within a family group, which do not thereby increase but merely maintain the aggregate percentage holdings of the group beyond twenty per cent (20%) of the bank's voting stock, shall be allowed: Provided , That no stockholder-member of a family group may acquire additional shares from any other member of that group, if such acquisition would increase his holdings of voting stock beyond the twenty per cent (20%) ceiling on individual holdings. LLjur b. Registration of transfer and other arrangements . The following regulations shall govern the registration of transfer and other arrangements with respect to voting stocks in banks, in furtherance of the purposes of Sections 12, 12-A, 12-B, and 12-D of Republic Act No. 337, otherwise known as the General Banking Act, as amended, and their implementing regulations. (1) Unlawful and void transactions involving voting stocks in banks . The following transactions, to the extent of the excess over any of the ceilings prescribed are hereby declared unlawful and void ab initio (a) The sale or transfer of voting stocks of banks to any individual or entity, if such sale or transfer, in itself, or in relation with another previous sale or transfer shall result in the ownership by foreign persons or corporations in excess of thirty per cent (30%) or, when allowed by the Monetary Board and approved by the President of the Philippines, forty per cent (40%) of the voting stock in the bank, in violation of Sections 12 and 12-A of Republic Act No. 337, as amended. (b) The sale or transfer of voting stocks of banks to any corporation, including its wholly-or majority-owned subsidiaries, if such sale or transfer, in itself, or in relation with another previous sale or transfer shall result in the ownership by such corporation and its wholly-or majority-owned subsidiary in excess of thirty per cent (30%) of the voting stock of the bank and the other limitations prescribed in Section 12-B of Republic Act No. 337, as amended. (c) The sale or transfer of voting stocks of banks to (i) any natural persons; (ii) persons related to each other within the third degree of consanguinity or affinity herein termed a family group; and (iii) any corporation or corporations which are wholly-owned or a majority of the voting stock of which is owned by a natural person such as in (i) above, or by a family group such as in (ii) above, including their wholly or majority owned subsidiaries, if such sale or transfer or encumbrance, in itself, or in relation with another previous sale or transfer, shall result in the ownership by such person or family group and such corporations in excess of twenty per cent (20%) of the voting stock of the bank, in violation of Sections 12-B and 12-D of Republic Act No. 337, as amended, and their implementing regulations. (d) Any arrangement, such as a voting trust agreement or proxy, which vests on any person or corporation the right to vote or control voting stocks in banks, if such agreement in itself, or in relation with another previous similar agreement or previous sale or transfer shall result in the acquisition of control, in excess of the limitations prescribed in Sections 12, 12-A, 12-B and 12-D of Republic Act No. 337, as amended and their implementing regulations. (2) Stockholders to be informed of the ineligibility to acquire or control additional voting shares . The Corporate Secretary shall promptly inform stockholders who have reached any of the ceilings imposed by law of their ineligibility to own or control more than the applicable ceiling. (3) Requirement for newly established banks . Entities which may hereinafter apply for a license to engage in banking business shall, before being allowed to operate, submit (a) An alphabetical list of stockholders with the number and percentage of voting stocks owned by them. (b) A separate list containing the names of persons who own voting stocks in banks and who are related to each other within the third degree of consanguinity or affinity, with proper indication of the combined percentage of voting stocks held by them in the particular bank, as well as corporations which are wholly-owned or a majority of the stock of which is owned by any of such persons, including their wholly or majority-owned subsidiaries. 4) Procedure in the transfer or registration of transactions of voting stocks in banks . In all transactions which may lawfully come to the knowledge of the Corporate Secretary involving transfer of voting shares of stock or registration of voting trust agreements, or any form of arrangement vesting the right to vote the voting shares of stock of the bank, the Corporate Secretary shall (a) ascertain the identity and citizenship of the transferee, voting trustee, proxy or person vested with the right to vote, and his relation to existing stockholders, and for this purpose, he should require the transferee, voting trustee, proxy or the person vested with the right to vote to submit proof of citizenship, which may consist, in case of a corporation, of a certified true copy of the articles of incorporation, accompanied by the affidavit of the Corporate Secretary of the corporation, certifying to the correctness and accuracy of the list of stockholders and the percentage of shares owned by them; (b) require the transferee, voting trustee, proxy or person vested with the right to vote, at the time of the receipt of the request for transfer or registration, or at any time thereafter, to disclose all information with respect to persons related to the transferee, voting trustee, proxy or person vested with the right to vote, within the third degree of consanguinity or affinity, as well as corporations, partnerships or associations where the transferee, voting trustee, proxy or person vested with the right to vote has equity interest, and the extent thereof, (c) require the transferee to execute an affidavit (sample format shown in Appendix (3) stating, among others, that the transferee is a bona fide owner of shares of stock and that he acknowledges full awareness of the requirements of the law and the prohibitions against exceeding ownership of voting stocks beyond the limitations prescribed by Sections 12, 12-A, 12-B, and 12-D of Republic Act No. 337, as amended, and their implementing regulations. In the event the request for transfer or the arrangement sought to be registered will patently cause the voting stocks of a person or persons related to each other within the third degree of consanguinity or affinity or corporations, to exceed the limits prescribed by law, the Corporate Secretary shall deny the transfer or registration and forthwith inform the parties to the transaction in writing. Simultaneous with the notice to the parties, the Corporate Secretary shall submit a written report to the Governor of the Central Bank of the attempted illegal transfer or arrangement, together with the names, addresses of parties and other pertinent data with respect to the particular stock transaction. In the event the Corporate Secretary has reason to doubt the legality of the transfer or of the arrangement sought to be registered, he may commence an action before the Securities and Exchange Commission, pursuant to its original and exclusive jurisdiction to hear and decide cases involving controversies arising out of intra-corporate relations. (5) Duties of securities brokers and dealers in case transaction is coursed through them . If the transfer of voting shares in banks is effected through the intercession of securities brokers and dealers, only securities brokers and dealers duly registered with the Securities and Exchange Commission can request the Corporate Secretary for the transfer of shares in banks. Securities brokers and dealers shall inform prospective sellers and buyers of voting stocks in banks that no person or persons related to each other within the third degree of consanguinity or affinity, or corporations can own more than the ceilings prescribed by law and that in case of a sale or transfer, shall require the transferee to furnish information and execute an affidavit, as provided in Subsec. 1126.1.b(4)(c). c. Transfers requiring prior Monetary Board approval (1) Prior approval of the Monetary Board shall be required on the following: (a) Any sale or transfer of ownership or control of more than twenty per cent (20%) of the voting stock of a bank to any person whether natural or juridical; and (b) Any sale or transfer or a series of sales or transfers which will effect a change in the majority ownership or control of the voting stock of the banks from one group of persons to another group: Provided , That in no case shall such sale or transfer be approved unless the bank concerned shall immediately comply with the prescribed minimum capital requirement for new banks notwithstanding any approved capital build-up program. ( Effective May 16, 1984 ) (2) For purposes of these regulations, the sale or transfer of voting stocks shall refer to sales or transfers of voting stocks which are allowed under existing laws or Central Bank rules and regulations and which have not been registered/recorded in the transfer book/stock ledger or other records of banks. (3) Banks shall submit to the Monetary Board of the Central Bank, through the appropriate supervising and examining department, not later than May 4, 1982, a list, duly certified by the corporate secretary, of all their stockholders appearing in the stock and transfer book of the bank concerned as of April 2, 1982. The list shall indicate the name of the stockholders, number and percentage of voting stocks in his name, the date when such voting stocks were registered in the name of the stockholder, and the certificate number(s) of the shares of stock held by such stockholder. (4) All sales or transfers of voting stocks of banks entered into or effected prior to April 2, 1982 and subsequently thereafter which have not been registered/recorded in the stock and transfer book of the bank concerned shall, before being accepted for registration/recording therein, be referred to the Monetary Board of the Central Bank through the appropriate supervising and examining department, for purposes of determining compliance with the requirements of these regulations as well as the provisions of existing laws and rules and regulations on ownership of voting stocks in banks. SUBSECTION 1126.2 Equity investments by foreigners in domestic banks . The following guidelines shall be observed in allowing equity investments by foreigners in domestic banks: a. The prior authority of the Monetary Board shall be obtained by foreign banking institutions, including their wholly or majority-owned subsidiaries and their holding companies having majority holdings in such foreign banking institutions, whenever acquiring shares of domestic banking institutions, including foreign-owned shares outstanding and foreign-held as of April 27, 1973 and which continued to be held by the foreign stockholder up to the date of the acquisition by the foreign banking institutions. b. If the foreign investor in the equity of a domestic banking institution is (1) an individual, (2) a non-financial entity, or (3) a non-bank financial entity which is not owned or controlled by a banking institution, its subsidiary or holding company, and the investor is acquiring shares which were not foreign-held as of April 27, 1973 nor continued to be held by the foreign stockholder up to the date of the acquisition by the foreign investor, the investment may be made only with the prior authority of the Monetary Board. c. The prior authority of the Monetary Board is not required if the foreign investor is (1) an individual, (2) a non-financial entity, or (3) a non-bank financial entity which is not owned or controlled by a banking institution, its subsidiary or holding company, and the investor is acquiring foreign-owned shares in existing domestic banks: Provided , That said shares were outstanding and foreign-held as of April 27, 1973 and which continued to be foreign-held up to the date of acquisition by the foreign investor. d. The maximum stockholdings foreigners may own in domestic banking institutions shall continue to be governed by existing provisions of law. e. Only foreign-owned shares directly funded by inward remittance of foreign exchange sold to the local banking system are qualified for registration with the Central Bank (thru the Management of External Debt and Investment Accounts Department) for capital repatriation and remittance of profits/dividends privileges, in accordance with existing Central Bank regulations. cdlex SUBSECTION 1126.3 Convertibility of preferred stock to common stock . Out of the preferred shares of stock which commercial banks may henceforth be authorized to issue, at least fifty per cent (50%) of each such issue of preferred stock shall be convertible into common stock at the option of the holders thereof after five (5) years from date of issue: Provided, however , That: a. The bank concerned may, if it so desires, allow the conversion of such preferred stock into common stock even before the lapse of five (5) years from date of issue. b. At the time of the sale of the preferred stock, both classes thereof (one with convertibility feature and the other without convertibility feature) shall be offered to the purchasers, with the purchasers having the option to acquire either or both classes of preferred stock. c. Preferred shares of stock with a cumulative feature issued by commercial banks shall automatically be convertible into common shares of stock at the option of the holders thereof whenever the rights as may be acquired by the holders by virtue of such cumulative feature are not satisfied by the bank within a period of three (3) years from date of issue. SUBSECTION 1126.5 (Additional provision as provided by CBP Circular 1173 dated April 11, 1988) SECTIONS 1127-1130. (Reserved) . SECTION 1131. Ceilings on Stockholdings in Commercial Banks and Expanded Commercial Banks . The following regulations shall govern the limits on stockholdings in a single bank or in several banks. SUBSECTION 1131.1 Limits of stockholdings in a single bank . The holdings of an individual, family, corporate or business group in a bank with expanded commercial banking functions and a commercial bank shall be subject to the limits prescribed in Section 12, 12-A, 12-B, and 12-D of Republic Act No. 337, as amended. a. Individual/family group/corporate ceiling . Except as otherwise allowed under Paragraph "b" below, the stockholdings in any bank of any of the following shall not exceed twenty per cent (20%) of the voting stock of the bank: (1) Any natural person; or (2) Persons related to each other within the third degree of consanguinity or affinity, herein termed a family group; or (3) Any corporation or corporations which are wholly-owned or a majority of the voting stock of which are owned by a natural person such as in (1) above, or by a family group such as in (2) above, including their wholly-or majority-owned subsidiaries: Provided , That where (3) together with (1) or (2) own or desire to own equity in any bank, their combined voting stockholding shall be the basis for the computation of the twenty per cent (20%) ceiling. b. Stockholdings in excess of ceiling . Any or all, as the case may be, of the above-mentioned stockholders owning more than twenty per cent (20%) of the voting stock of any bank on the date of the effectivity of Presidential Decree No. 71 amending Republic Act No. 337, as amended, may maintain but may not increase such holdings in percentage terms; and once reduced, the same may not thereafter be increased beyond twenty per cent (20%) of the bank's voting stock. c. Determination of (1) relationship within the third degree of consanguinity or affinity, and (2) a "family group" subject to the twenty per cent (20%) ceiling (1) Relationship of persons to each other within the third degree of consanguinity or affinity shall be determined in accordance with the provisions of Articles 963 to 966 of the Civil Code of the Philippines. (2) Persons owning voting stock in a bank who are related to each other within the third degree of consanguinity or affinity shall comprise a family group whose combined holding is subject to the twenty per cent (20%) ceiling. Persons who are related to each other but not within the third degree, such as first cousins, do not form a family group. In determining whether the prospective transferee or purchaser is part of a family group subject to the twenty per cent (20%) limit/ceiling, the degree of relationship shall be counted from the transferee or purchaser. It is possible for a person to belong to several family groups, and in such a case, it is enough that the percentage limit of twenty per cent (20%) for one family group is exceeded for the acquisition/transfer of shares to be considered a violation, even if the transaction may not violate the limit for all of the other possible family groups. (As amended by CBP Circular 1171 dated March 29, 1988) SUBSECTION 1131.2 Limits on stockholdings in several banks . Stockholders affiliated to each other through a common business interest herein termed a business group or any corporation or association majority or all of the equity of which is owned by a business group may not control more than one commercial bank nor more than one bank with expanded commercial banking authority, nor both. Any natural person or persons related to each other within the third degree of consanguinity or affinity, hereinafter termed as a family group, who, together with any corporation majority or all of the equity of which is owned by such person or family group, own more than twenty per cent (20%) of the voting stock of any expanded commercial bank or commercial bank may not acquire more than twenty per cent (20%) of the voting stock in any other expanded commercial bank or commercial bank, even if the shares of stock are being acquired from a natural person in a single transaction and the stockholding is in excess of twenty per cent (20%) of the bank's voting stock. For purposes of determining applicability of the limitations provided in this section, stockholders shall be deemed as affiliated to each other through common business interest or a business group in cases where the holdings of such stockholders altogether constitute a majority or control in one or more enterprises. SECTIONS 1132-1135. Reserved . SECTION 1136. Dividends . The declaration of cash dividends by banks shall be governed by the following regulations. SUBSECTION 1136.1 Declaration of cash dividends Pursuant to the first paragraph of Section 84 of Republic Act No. 337, as amended, and on the underlying principle that no bank shall, while it continues in operation, withdraw or permit to be withdraw, either in the form of cash dividends or otherwise, any portion of its capital, the following regulations on the declaration of cash dividends by banks shall govern. a. Definition of terms . For purposes of this subsection, the following definitions shall apply: (1) Bad debts shall include any debt on which interest is past due for a period of six (6) months, unless it is well secured and in process of collection. A loan payable in installments with an automatic acceleration clause shall be considered a bad debt within the contemplation of this subsection where installments or amortizations have become past due for a period of six (6) months, unless the loan is well secured and in process of collection. For a loan payable in installments without an acceleration clause, only the installments or amortizations that have become past due for a period of six (6) months and which are not well secured and in the process of collection shall be considered bad debts within the contemplation of this subsection. (2) Well-secured a debt shall be considered "well secured" (or fully secured) if it is covered by collateral in the form of a duly constituted mortgage, pledge, or lien or real or personal properties, including securities, having a loan value sufficient to discharge the debt in full, including accrued interest and other pertinent fees and expenses. (3) In process of collection a debt due to a bank shall be considered in process of collection when it is the subject to continuing extrajudicial or judicial proceedings aimed towards its full settlement or liquidation, or otherwise to place it in current status. The extrajudicial proceedings, such as the writing of collection or demand letters, must have been initiated by the bank and/or its lawyers before the interest or installments or amortizations on the debt have become past due and unpaid for a period of six (6) months. The debt shall continue to be considered in process of collection for a period of six (6) months counted from date of the first collection or demand letter and if, within this period, the debtor fails to make a payment of at least twenty per cent (20%) of the outstanding balance of the principal on his account, plus all interest which may have accrued thereon, the same shall automatically be classified as bad debt unless judicial proceedings are instituted. The debt shall continue to be considered in process of collection during the pendency of the judicial proceedings. When judgment against the debtor has been obtained, the bank must be active in enforcing the judgment for the debt to continue to be considered in process of collection. b. Accrued interest . Accrued interest earned but not yet collected or received on loans or any installments thereon shall not be considered profits and/or earnings for purposes of cash dividend declaration. c. Amount available as dividends . The net amount available for cash dividend declaration shall be the total of unrestricted or free earned surplus and undivided profit less: (1) Bad debts against which valuation reserves are not required to be set up; (2) Unbooked valuation reserves, and other unbooked capital adjustments required by the Central Bank, whether or not allowed to be set up on a staggered basis; (3) Accrued interest receivable credited to income but not yet collected, net of reserves for uncollected interest on loans; and (4) Deferred income tax as defined under item 'j' of Subsection 1116.4. ( Effective April 23, 1985 ). SUBSECTION 1136.1.c.5 (Additional provision as provided by No. 1a of CBP Circular 1170 dated January 13, 1988) d. Reporting and verification . Declaration of cash dividends shall be reported by the bank concerned to the appropriate supervising and examining department of the Central Bank within ten (10) banking days from date of approval of the declaration by the bank's board of directors. The report shall be submitted in the prescribed form. Pending verification of above-mentioned report by the appropriate supervising and examining department of the Central Bank, the bank concerned shall not make any announcement or communication on the declaration of cash dividends nor shall any payment be made thereon. Banks, however, whose share are listed with any domestic stock exchange may declare cash dividends and give immediate notice of such declaration to the Securities and Exchange Commission (SEC) and the stock exchanges, in compliance with pertinent rules of SEC: Provided , That no record date is fixed for such cash dividend pending verification of the report on such declaration by the appropriate supervising and examining department of the Central Bank. In any case, the declaration may be announced and the dividends paid, if, after thirty (30) banking days from the date the report required herein shall have been received by the Central Bank, no advice against such declaration has been received by the bank concerned. e. Recording of dividends . The liability for cash dividends declared shall be taken up in the bank's book on the date of approval of the board of directors. Dividends of all kinds, whether on common or on preferred shares of stock, should not be treated as interest expense, considering that as a general policy, only irredeemable stock may be issued by banks. SUBSECTION 1136.2 When banks are prohibited from declaring cash dividends . A bank shall be prohibited from declaring cash dividends in the following cases: a. If its clearing account with the Central Bank is overdrawn for five consecutive days. b. If it is deficient in the required liquidity floor for government deposits for four consecutive days. SUBSECTION 1136.5 (Additional provision as provided by CBP Circular 1182 dated August 30, 1988) SECTIONS 1137-1140. (Reserved) . F. DIRECTORS, OFFICERS AND EMPLOYEES SECTION 1141. Definition and Qualifications of Directors . For purposes of this section, the following shall be the definition and qualifications of directors. SUBSECTION 1141.1 Definition of directors . Directors shall include (1) directors who are named as such in the articles of incorporation, (2) directors duly elected in subsequent meetings of the bank's stockholders, and (3) those elected to fill vacancies in the board of directors. SUBSECTION 1141.2 Qualifications of a director . A director shall have the following minimum qualifications: a. He shall be at least twenty-five (25) years of age at the time of his election or appointment; and b. He shall be at least a college graduate or have at least five (5) years experience in business, or have undergone training in banking acceptable to the Department of Commercial and Savings Banks. The foregoing qualifications for directors shall be in addition to those already required or prescribed by Republic Act No. 337, as amended, and other existing applicable laws and regulations. SECTION 1142. Definition and Qualifications of Officers . For purposes of this section, the following shall be the definition and qualifications of officers. SUBSECTION 1142.1 Definition of officers . Officers shall include the President, Executive Vice President, Senior Vice President, Vice President, General Manager, Secretary, Trust Officer, and others mentioned as officers of the bank, or those whose duties as such are defined in the by-laws, or are generally known to be the officers of the bank (or any of its branches and offices other than the head of office) either through announcement, representation, publication or any kind of communication made by the bank. SUBSECTION 1142.2 Qualifications of an officer . An officer shall have the following minimum qualifications: a. He shall be at least twenty-one (21) years of age; and b. He shall be at least a college graduate, or have at least (5) years experience in banking or trust operations or related activities or in a field related to his position and responsibilities, or have undergone training in banking or trust operations acceptable to the Department of Commercial and Savings Banks: Provided, however , That trust officers, shall have at least two (2) years of actual experience or training in trust experience or fund management of other related fields. The foregoing qualifications for officers shall be in addition to those already required or prescribed by Republic Act No. 337, as amended, and other existing applicable laws and regulations. SECTION 1143. Disqualifications of Directors or Officers . The following regulations shall govern the disqualifications of bank directors or officers. SUBSECTION 1143.1 Persons disqualified to become directors . Without prejudice to specific provisions of law prescribing disqualifications for directors, the following are disqualified from becoming directors: a. Persons who have been convicted judicially or administratively of an offense involving moral turpitude, or judicially declared insolvent, spendthrift, or incapacitated to contract; b. Directors, officers and employees who have been removed by the Monetary Board pursuant to the provisions of Section 34-A of Republic Act No. 265, as amended, and other provisions thereof; c. Persons who shall refuse to disclose the extent of their business interest to the Department of Commercial and Savings Banks when required for the proper implementation of a provision of law or of a circular, memorandum or rule or regulation of the Central Bank. This disqualification shall be in effect as long as the refusal persists; d. Directors, excluding non-resident directors representing foreign equity interests, who have been absent for whatever reasons for more than fifty per cent (50%) of all meetings, both regular and special, of the board of directors for a two-year period reckoned from the date of the election of the director concerned. This disqualification applies for purposes of the succeeding election; e. Those who are delinquent in the payment of their obligations as defined hereunder: (1) Delinquency in the payment of obligations means that an obligation of a person with a bank where he is a director or officer or where he may be elected or appointed to said position, or at least two obligations with other banks and with non-bank financial intermediaries performing quasi-banking functions, under different credit lines or loan contracts, are past due for at least three (3) months. (2) Obligations shall include all borrowings from a bank or from a non-bank financial intermediary performing quasi-banking functions obtained by: (a) A director or officer for his own account or as the representative or agent of others or where he acts as a guarantor, indorser or surety, for loans from such financial institutions; (b) The spouse or child under the parental authority of the director or officer; (c) Any person whose borrowings or loan proceeds were credited to the account of, or used for the benefit of a director or officer; (d) A partnership of which a director or officer, or his spouse is the managing partner, or a general partner owning a controlling interest in the partnership; and (e) A corporation, association or firm wholly-owned or majority of the capital of which is owned by any or a group of persons mentioned in the foregoing Items (a), (b) and (d); f. Persons found by the Monetary Board to have willfully failed or refused to comply with any banking law, order, instruction or regulation issued by the Monetary Board or by the Governor, or to have committed irregularities or to have conducted business in an unlawful, unsafe or unsound manner as determined by the Monetary Board in any institution supervised by the Central Bank; g. Persons who have been dismissed for cause from any institution under the regulation or supervision of the Central Bank. The foregoing disqualifications for directors shall be in addition to those already required or prescribed by Republic Act No. 337, as amended, and other existing applicable laws and regulations. SUBSECTION 1143.2 Persons disqualified to become officers a. The disqualifications for directors mentioned in Subsec. 1143.1 shall likewise apply to officers, except that stated in Item "d". b. Except as may be authorized by the Monetary Board or the Governor, the spouse or a relative within the second degree of consanguinity or affinity of any person holding the position of Chairman, President, Executive Vice President or any position of equivalent rank, General Manager, Treasurer, Chief Cashier or Chief Accountant is disqualified from holding or being elected or appointed to any of said positions in the same bank; and the spouse or a relative within the second degree of consanguinity or affinity of any person holding the position of Manager, Cashier, or Accountant of a branch or extension office of a bank is disqualified from holding or being appointed to any of said positions in the same branch or extension office. c. Except in the case of technical personnel whose employment may be specifically authorized by the Minister of Justice, foreigners cannot be officers or employees of commercial banks. Institutions concerned shall file with the Ministry of Justice the necessary request for authority to employ any foreign technical personnel, in accordance with the procedure prescribed in Office Circular of the Ministry of Justice dated May 28, 1976. The effectivity of Office Circular of the Ministry of Justice dated May 28, 1976 shall be January 31, 1977 for bank employees who have applied for naturalization under LOI 270, and December 31, 1976 for institutions employing foreigners who have not applied for naturalization under LOI 270. The foregoing disqualifications for officers shall be in addition to those already required or prescribed by Republic Act No. 337, as amended, and other existing applicable laws and regulations SUBSECTION 1143.3 Disqualification procedures a. Upon the establishment of any of the grounds for disqualification mentioned in Subsecs. 1143.1 and 1143.2 the office of the disqualified director or officer shall immediately become vacant, except in the case of delinquency in the payment of obligations wherein the director or officer concerned shall be given a grace period of thirty (30) days after such ground for disqualification has been established. b. All cases of disqualification shall immediately be reported to the Board of Directors of the institution concerned. If the ground for disqualification is delinquency in the payment of obligations, the report shall be made at the expiry of the thirty-day grace period mentioned in Item "a" above. The Board shall act on the report not later than the following Board meeting. Within seventy-two (72) hours thereafter, the corporate secretary shall report to the Governor of the Central Bank through the Department of Commercial and Savings Banks the name of the director or officer involved, the ground for his disqualification and the action taken by the Board. c. When the ground for disqualification ceases to exist, the director or officer concerned shall be eligible to become director or officer of any institution regulated or supervised by the Central Bank only upon prior approval of the Governor of the Central Bank. SUBSECTION 1143.4 Effect of non-possession of qualifications or possession of disqualifications Unless otherwise provided, directors/officers elected or appointed without possessing the qualifications abovementioned or possessed of any of the disqualifications as enumerated herein, shall vacate their respective positions immediately. SECTION 1144. Bio-data of Directors or Officers . All bank directors and officers shall be requited to submit bio-data as provided hereunder: a. All banks shall submit to the Department of Commercial and Savings Banks a bio-data of all of their incumbent directors including a list of relatives of legal age within the second degree of consanguinity or affinity. Any subsequent change in the composition of the board of directors, together with the bio-data of the new directors shall be submitted within seven (7) days to the Department of Commercial and Savings Banks. b. The format for reporting biographical data of directors and officers of banks shall be in accordance with the prescribed form (CBP 7-16-18KB). The biographical data shall be updated annually within 25 banking days after the end of the calendar year. In the case of changes in educational attainment and experience in banking, only additional qualifications that will enhance the director's or officer's competence or will qualify him to his present position shall be reported. c. All banks, including building and loan associations, shall submit to the appropriate supervising and examining department within twenty-five (25) banking days following the date of the annual election of the board of directors as provided in the bank's by-laws a list of the members of the board of directors and officers. The list shall be submitted whether or not the annual election results in a change in the composition of the board of directors. The submission of the bio-data of incumbent directors and officers as required under Item b shall be considered compliance with the requirement under Item a of this section. d. In the case of directors elected or appointed after December 31, 1978 and whose bio-data have not been submitted pursuant to Items a and b of this section, the deadline for submission shall be within seven (7) banking days after election or appointment. In case of transfers to other banks, the director need only update the pertinent sections in the pages of the report. Submission shall be within seven (7) banking days from election or appointment. e. A report on changes in the composition of the board of directors shall be submitted within seven (7) banking days after such change. f. For purposes of showing compliance with the minimum qualification requirements in case of promotion, only the updated data need be reflected in the section and page affected. The page shall be submitted within seven (7) banking days after promotion. g. The bio-data shall be submitted only once. Thereafter, in the annual updating, only the pertinent sections and pages in the report form shall be submitted within twenty-five (25) banking days after the end of every calendar year. cdlex The guidelines on the submission of bio-data by directors shall likewise apply to officers elected or appointed. SECTION 1145. (Reserved) . SECTION 1146. Interlocking Directorships and/or Officerships . In order to safeguard against the exercise by the same person or group of persons of undue influence over the policy-making and/or management functions of similar financial institutions that could have an adverse effect on competition or which could result in conflict of interest situations to the detriment of others, the following regulations shall govern interlocking directorships and/or officerships within the financial system. SUBSECTION 1146.1 Interlocking directorships . While concurrent directorships may be the least prejudicial of the various relationships cited in this section to the interests of the institutions involved, certain measures are still necessary to ensure against the disadvantages that could result from indiscriminate concurrent directorship. a. Except as may be authorized by the Monetary Board or as otherwise provided hereunder, there shall be no concurrent directorships between banks or between a bank and a non-bank financial intermediary. b. Without the need for prior approval of the Monetary Board, concurrent directorships between the following entities shall be allowed in the following cases: (1) Banks not belonging to the same category: Provided , That not more than one of the banks shall have quasi-banking functions; (2) A non-bank financial intermediary other than an investment house not performing quasi-banking functions, and a bank; (3) A bank not performing quasi-banking functions and a non-bank financial intermediary, other than an investment house, performing quasi-banking functions; and (4) A bank with expanded commercial banking authority or a commercial bank, and one or more financial institutions other than an investment house in each of which majority interest is held by the bank. SUBSECTION 1146.2 Interlocking directorship and officership . In order to prevent any conflict of interest resulting from the exercise of directorship coupled with the reinforcing influence of an officer's decision-making and implementing powers, the following rules shall be observed: a. Except as may be authorized by the Monetary Board or as otherwise provided hereunder, there shall be no concurrent directorship and officership between banks or between a bank and a non-bank financial intermediary, whether or not performing quasi-banking functions; and b. Without need for prior approval of the Monetary Board, concurrent directorship and officership in a bank with expanded commercial banking authority or a commercial bank and one or more financial institutions other than investment houses in each of which majority interest is held by the bank shall be allowed. SUBSECTION 1146.3 Interlocking officerships . A concurrent officership in different financial intermediaries present a more serious conflict of interest problem. Considering the full-time nature of officer positions, the difficulties of serving two offices at the same time, and the need for effective and efficient management, the following rules shall be observed: a. There shall be no concurrent officerships between banks or between a bank and a non-bank financial intermediary, whether or not performing quasi-banking functions, except as otherwise provided hereunder. b. With prior approval of the Monetary Board, concurrent officerships may be allowed in the following cases: (1) between an expanded commercial bank or a commercial bank and one or more financial institutions majority of the equity of which is owned by the expanded commercial bank or commercial bank; or (2) between two or more banks and non-bank financial intermediaries, other than investment houses, whether or not performing quasi-banking functions, majority of the equities of which is owned by an expanded commercial bank or a commercial bank; and (3) between banks or between a bank and a non-bank financial intermediary other than an investment house: Provided , That at least twenty per cent (20%) of the equity of each of the banks and non-bank financial intermediaries is owned by a holding company or a bank and the interlocking arrangement is necessary for the holding company or the bank to provide technical expertise or managerial assistance to its affiliates, subject to the following conditions: (a) that the positions do not involve any functional conflict of interests; (b) that the position of chief executive officer may be held by a person in only one financial intermediary; (c) that the officer involved, or his spouse or any of his relatives within the first degree of consanguinity or affinity or by legal adoption, or a corporation, association or firm wholly or majority-owned or controlled by such officer or his relatives enumerated above, does not own in his/its own capacity more than twenty per cent (20%) of the subscribed capital of the entities in which the bank has equity investments; and (d) that where any of the positions involved is held on a full-time basis, adequate justification shall be submitted to the Monetary Board. (As amended by CBP Circular 1115 dated September 16, 1986) SUBSECTION 1146.4 Representatives of government . The foregoing prohibitions shall not apply to persons appointed to such positions as representatives of the Government or government-owned or controlled entities. SUBSECTION 1146.5 Categories of banks . In relation to Subsec. 1146.1.b(1), the categories of banks are the following: a. Banks with expanded commercial banking authority and commercial banks; b. Thrift banks, composed of savings and mortgage banks, stock savings and loan associations and private development banks; and c. Rural banks. SUBSECTION 1146.6 Definition of directors and officers . For purposes of this section, the following shall be the definition of directors and officers. a. Definition of directors . Directors shall refer to the bank directors duly holding their positions as such in accordance with the corporate by-laws and pertinent provisions of law. b. Definition of officers . Officers shall include the President, Vice-President, and others mentioned as officers of the bank, or those whose duties as such are defined in the by-laws, or are generally known to be the officers of the bank (or any of its branches and offices other than the head office) either through announcement, representation, publication or any kind of communication made by the bank: Provided , That a person holding the position of Chairman or Vice-Chairman of the Board or another position in the Board shall not be considered as an officer unless the duties of his position in the Board include functions of management such as those ordinarily performed by regular officers: Provided, further , That members of a group or committee, including sub-groups or sub-committees, whose duties include functions of management such as those ordinarily performed by regular officers, shall likewise be considered as officers for the purpose of this section: and Provided, finally , That for purposes of the rules on interlocking directorships, a husband and his wife shall be considered as one person. SECTION 1147. Profit Sharing Programs for Directors, Officers and Employees . The following regulations shall govern the profit sharing of directors, officers, and employees of banks and non-bank financial intermediaries authorized to perform quasi-banking functions (NBQBs): a. Profit sharing programs adopted in favor of directors, officers and employees shall be reflected in the by-laws of the bank or the NBQB concerned; Provided , That these guidelines shall apply during the interim period that the bank or NBQB has not effected these changes in its by-laws. b. The base in any profit sharing program shall be the net income for the year of the bank/NBQB as shown in its Consolidated Statement of Income and Expenses for the year, net of the following: (1) All cumulative dividends accruing to preferred stock to the extent not covered by earned surplus; (2) Accrued interest receivable credited to income but not yet collected, net of reserves already set up for uncollected interest on loans; (3) Unbooked valuation reserves on loans or an amount required to update valuation reserves in accordance with the schedule approved by the Monetary Board, as well as all amortizations due on deferred charges; (4) Provision for current year's income taxes; and (5) Income tax deferred for the year. Provided, however , That in case of reversal of deferred income taxes which were deducted from net income in computing for profit sharing of previous years, the deferred income tax reversed to expense shall be added back to net income to arrive at the base for profit sharing for the year during which the reversal is made. ( Effective April 23, 1985 ). SUBSECTION 1147.b.6 (Additional provision as provided by No.1b of CBP Circular 1170 dated January 13, 1988) c. The bank/NBQB may provide in its by-laws for other priorities in the computation of net profits for purposes of profit sharing: Provided , That in no case shall profit sharing take precedence over any of the items in the preceding paragraph. d. Prior approval of the Monetary Board shall be necessary before a bank/NBQB which has received financial assistance from the Central Bank may implement its profit sharing program in favor of its directors, officers and employees. Financial assistance shall refer to emergency loans and advances and to availments under the lender of last resort facility in the form of loans, advances, rediscounts and such other forms of credit accommodations which are intended to provide banks and NBQBs with liquidity in times of need. SECTIONS 1148-1150. (Reserved) . G. BANKING OFFICES SECTION 1151. Establishment/Relocation of Banking Offices . Banks with expanded commercial banking authority and commercial banks may establish banking offices which include branches, sub-branches, agencies and extension offices on a nationwide basis, as well as overseas where necessary for efficient and effective banking operations. Banks with expanded commercial banking authority shall be given preference in the establishment of banking offices abroad. The following regulations refer primarily to the establishment of local offices; the establishment of offices abroad may be subject to different criteria. (As amended by Section 1 of BSP Circular 93 dated October 30, 1995) SUBSECTION 1151.1 Prior Monetary Board approval . No bank operating in the Philippines shall establish, open or operate branches and other banking offices, or transact business outside the premises of its duly authorized principal office, without the prior approval of the Monetary Board. (As amended by Section 2 of BSP Circular 93 dated October 30, 1995) SUBSECTION 1151.2 Citizenship requirements . A bank with expanded commercial banking authority or a commercial bank applying for authority to establish additional banking offices must comply with the following requirements: a. At least seventy per cent (70%) of the voting stock shall be owned by Filipinos except when such required minimum percentage is reduced to sixty per cent (60%) pursuant to law; b. At least two-thirds (2/3) of the members of the board of directors shall be Filipinos. (As amended by Section 3 of BSP Circular 93 dated October 30, 1995) SUBSECTION 1151.3 Capital requirements . As a general rule, banks with expanded commercial banking authority, commercial banks and specialized government banks may apply for authority to establish additional banking offices upon compliance with the minimum capital required under existing regulations: Provided, however , That an applicant bank may be required to put up additional capital in an amount to be determined by the appropriate supervising and examining department based on criteria which consider expected growth of risk assets and capital accounts: Provided, further , That any bank applying for authority to establish a branch/banking unit in any of the classified service areas as provided in Subsec. 1151.5 shall immediately comply with the prescribed minimum paid-in capital unimpaired by (a) unbooked valuation reserves and other capital adjustments as may be required by the Central Bank and (b) total outstanding unsecured credit accommodations to directors, officers, stockholders, and their related interest (DOSRI). ( Effective June 3, 1983 ). (As amended by Section 4 of BSP Circular 93 dated October 30, 1995) SUBSECTION 1151.4 Other requirements/factors to be considered . Other requirements/factors to be considered are the following: * service area is defined as an area of interrelated and interacting local economic activities. The service area may be considered overbanked if (1) the rates of return are so depressed by an excess of banks in the area that adequate banking performance for the customers' benefit is threatened in the long run; and (2) the overall level of deposits of banks in the area or their growth indicates no reasonable prospects that the situation in (1) above will be reversed in the short run. c. A certification under oath by the bank's chief executive officer or officer of similar authority to the effect that the applicant bank has no float items in its Due From/To Head Office/Branches/Offices accounts as well as its Due from Central Bank account which are outstanding for more than sixty (60) calendar days exceeding one per cent (1%) of its total resources as of the end-of-month nearest to the application date shall be submitted. d. Proposed banking offices shall not be allowed in premises purchased, acquired or leased to the disadvantage of another bank under circumstances attended by bad faith. e. No proposed banking office shall be established in a place adjoining the premises of an existing rural bank/branch: Provided, however , That a rural bank/branch is not precluded from establishing a banking office adjoining the premises of any existing banking office, or of an approved but not yet opened banking office. f. The applicant bank shall submit a written declaration under oath of (1) the manner of occupancy/acquisition of the premises and the consideration for the lease, purchase or acquisition of such premises; and (2) the name of the previous owner, lessor and lessee, indicating the banking institutions, if any, which had previously occupied such premises. g. Applications for authority to establish additional banking offices shall be accompanied as a minimum by the following information/documents: 1) Certified true copy of the resolution of the bank's board of directors authorizing the application for the establishment of the additional banking office. 2) Sketch of the area to be served showing the following information: (a) Proposed site of the banking office to be established. (b) Names and location of existing banking offices in the area, if any, and approximate distance from the proposed banking office. (c) Distance from the Head Office or mother branch in case the additional banking office applied for is a money shop. (d) Distance from the market, in case of a money shop. 3) Banking facilities and services to be offered. 4) Business or economic justification stating facts and figures (such as population and growth of population, number and names of the principal industrial, commercial and other establishments within the effective area of operation, deposit and loaning potentials, traffic flow and other information) tending to show that the establishment of the proposed banking office is justified on the basis of local public need therefor. 5) Projected statement of condition at the end of the first and second semesters of operations of the proposed banking office. 6) Statement of estimated earnings and expenses for the first 12 months of operation. 7) Organizational setup of the proposed banking office showing the proposed positions and annual pay for each, and the names, qualifications and experience of the proposed manager and other officers. 8) Bank premises and initial outlay. SUBSECTION 1151.5 Condition precluding acceptance of application . The application for the establishment of additional offices shall not be accepted by the Central Bank from an applicant bank which has six (6) approved but unopened banking offices (including money shops): Provided , That applications which may be accepted at any given time from a bank shall be such that if all these applications were approved, the applicant shall not have authorized but unopened offices in excess of the limitations herein prescribed. The prescribed ceiling on applications may be increased on a case-to-case basis upon prior approval of the Governor, on the basis of resources, personal capability and, generally, a demonstration of the capability of the bank to organize and staff an increased number of banking offices within a reasonable time. (As amended by Section 6 of BSP Circular 93 dated October 30, 1995) SUBSECTION 1151.6 Conditions precluding processing of application . The existence of any of the following conditions shall preclude/suspend processing of the application: a. The applicant's operation during the year immediately preceding the filing of the application was unprofitable; b. The applicant has not complied with the ceilings on credit accommodations to directors, officers, and/or stockholders; c. The net worth of the applicant is found to be deficient for five (5) or more times within a thirty (30)-day period during the last six (6) months immediately preceding the date the application was received, in which case its privilege to establish banking offices shall be suspended for the next sixty (60) calendar days without prejudice to the re-submission of its application after said period; d. The net worth of the applicant is found to be deficient continuously for a period of thirty (30) days or more during the last twelve (12) months immediately preceding the date the application was received, in which case its privilege to establish banking offices shall be suspended for the next twelve (12) months without prejudice to the re-submission of its application after said period; e. The applicant has incurred net deficiencies in reserves against deposit/deposit substitute liabilities for four (4) consecutive weeks, in which case its application shall be processed only after it shall have had no net reserve deficiencies for eight (8) consecutive weeks: Provided , That in case the applicant had incurred net deficiencies in reserves for eight (8) consecutive weeks during the last twelve (12) months immediately preceding the date the application was received, its privilege to establish banking offices shall be suspended for the next twelve (12) months without prejudice to the re-submission of its application after said period; f. The applicant has transferred the location of banking offices without Central Bank authority, in which case the receipt/processing of applications shall be suspended for a period of at least six (6) months from the date of knowledge of the Central Bank; g. The bank has not complied with the investment-deposit ratio for four (4) consecutive quarters immediately preceding the date the application was received; or h. The bank has failed to comply with the requirement to set aside twenty-five per cent (25%) of its loanable funds of which ten per cent (10%) shall be set aside for agrarian reform credit and fifteen per cent (15%) for agricultural credit in general. (As amended by Section 7 of BSP Circular 93 dated October 30, 1995) SUBSECTION 1151.7 Priority in processing a. Only applications complete with the minimum documents required by the appropriate supervising and examining department shall be accepted for any area on a first-come first-served basis, regardless of whether or not there are approved but unopened banking offices in the area: Provided , That such applications shall be processed on a priority basis, only when there are less than two (2) approved but unopened banking offices, irrespective of type and category (excluding head offices, and other banking offices not opened within the extension period granted), in the same area. b. The mere filing or pendency of an application for the establishment of a banking office in a particular area shall not give an applicant priority over other applicants with respect to such area. Preference shall be given to the application which satisfies all Central Bank requirements. If two or more applica- * of at least six (6) months, from the date of knowledge of the Central Bank; g. The bank has not complied with the investment-deposit ratio for four (4) consecutive quarters immediately preceding the date the application was received; or h. The bank has failed to comply with the requirement to set aside twenty-five per cent (25%) of its loanable funds of which ten per cent (10%) shall be set aside for agrarian reform credit and fifteen per cent (15%) for agricultural credit in general. SUBSECTION 1151.7 Priority in processing a. Only applications complete with the minimum documents required by the appropriate supervising and examining department shall be accepted for any area on a first-come-first-served basis, regardless of whether or not there are approved but unopened banking offices in the area. Banks with expanded commercial banking authority and consolidated or merged rural banks and multi-town rural banks shall be given priority in the processing of applications to establish banking units in areas inadequately served by existing rural banks: Provided, however , That among such applicants, the first-come-first-served basis shall also apply. ( Effective June 3, 1983 ) b. The mere filing or pendency of an application for the establishment of a banking office in a particular area shall not give an applicant priority over other applicants with respect to such area. Preference shall be given to the application which satisfies all Central Bank requirements. If two or more applications satisfy all Central Bank requirements, the application which was filed first shall be given preferential consideration. c. Priorities in the establishment of a money shop in the same market shall be based both on the date of filing of an application and its completeness with respect to Central Bank regulations. Thus, a complete application even if filed later shall take precedence over another which, although filed earlier, has not fully complied with Central Bank requirements. (As amended by Section 8 of BSP Circular 93 dated October 30, 1995) SUBSECTION 1151.8 Date of opening Approved banking offices shall be opened within six (6) months from the date of approval thereof: Provided , That an applicant bank may be given a final extension of another three (3) months subject to presentation of justification and valid reason for the bank's failure to open within the six (6)-month period and proof that said banking office can be opened within the succeeding three (3) month period. (As amended by Section 9 of BSP Circular 93 dated October 30, 1995) SUBSECTION 1151.9 Relocation of banking offices . Applications for authority to transfer or relocate banking offices of commercial banks (except head offices) shall be accompanied by the following information/papers/documents: a. Certified true copy of the resolution of the bank's board of directors authorizing the transfer/relocation; b. Sketch of the area of operations showing the present location and the new location and the approximate distance between the two as well as from other banking offices; c. Reasons/justifications for the transfer/relocation; and d. Estimated expenses to be incurred for the transfer which should include outlays for the new bank premises. No application shall be accepted/processed unless all the minimum requirements accompany the corresponding applications. (As amended by Section 10 of BSP Circular 93 dated October 30, 1995) SUBSECTION 1151.10 Lease expenses prior to authorization to establish branch . Contracts of lease of premises for a proposed branch which are entered into prior to approval of the application for the establishment of such branch shall be at the risk of the banks concerned, considering that there is no assurance that the covering application to establish a branch will be approved. Banks having incurred expenses in connection with their proposed establishment of branches, such as for acquisition/improvement of rental of premises, purchase/installation of equipment and furniture, employment/training of personnel, and acquisition of materials and supplies, is not a basis for, and does no entitle them to, the approval of applications to establish branches. (As amended by Section 11 of BSP Circular 93 dated October 30, 1995) SECTION 1152. Money Shops . Existing money shops shall be classified as extension offices subject, among others, to the reporting requirement prescribed under Subsec. 1161.17. ( Effective July 25, 1983 ). SECTIONS 1153-1155. (Reserved) . H. BANKING DAYS AND HOURS SECTION 1156. Banking days and hours . Effective June 1, 1984, all banks, their branches, agencies and extension offices (including moneyshops and savings agencies) doing business in the Philippines with the exception of banks located in the Manila International Airport and the Malabon, Navotas fishports, shall observe a five-day banking week for the conduct of their business, the banking days during which each banking unit may be opened to be selected by the bank concerned; Provided, however , That the Monetary Board, may authorize exemptions therefrom, if warranted, by areas. Special holidays proclaimed for local governments shall be considered as regular banking days. Thus, banks should open on such days if the same fall on regular banking days selected and need not give the notice prescribed under subsections 1156.4 (Book I), 2156.2 (Book II) and 3156.4 (Book III). In the case of special holidays for special purposes under Section 4 of LOI No. 1087 such as elections and related events, which, by the terms of their proclamation, are specifically declared as non-working days, banks, may at their discretion open on such days if the same fall on regular banking days selected, provided they shall comply with the reporting requirement prescribed under subsections 1156.4 (Book I), 2156.2 (Book II) and 3156.4 (Book III). ( Effective May 15, 1984 ). All banks, including their branches, agencies and extension offices, doing business in the Philippines, shall transact business for not less than six (6) hours a day, to be selected by the bank concerned, between 8:00 o'clock in the morning and 8:00 o'clock in the evening: Provided , That in the exercise of the option granted in this section, banks may transact business for less than six (6) hours. (As amended by BSP Circular 86 dated September 11, 1995) SUBSECTION 1156.1 Banking Hours beyond the minimum . For purposes of servicing deposits and withdrawals, banks may, at their discretion and after prior written notice to the Department of Commercial and Savings Banks, remain open beyond the minimum six (6) hours and for as long as they find it necessary, even before 8:00 o'clock in the morning or after 8:00 o'clock in the evening. Banks may, after prior written notice, also remain open beyond the minimum six (6) hours for banking services other than the servicing of deposits and withdrawals but in no case shall such banking hours start earlier than 8:00 o'clock in the morning nor extend beyond 8:00 o'clock in the evening. SUBSECTION 1156.2 Report of, and changes in, banking days and hours . The banking days and hours selected for each of the offices of banks shall be reported in writing to the Department of Commercial and Savings Banks. Banks may change the banking days and hours previously reported to the Central Bank by giving prior written notice to the Department of Commercial and Savings Banks: Provided , That except in emergencies, changes in banking days or hours shall not be made oftener than once every thirty (30) days. Any change in money shop banking hours and days will be reported in writing (i.e., need not require prior approval) to the Department of Commercial and Savings Banks seven days prior to the effectivity of the proposed change except in case of an emergency where a twenty-four hour written notice will suffice. SUBSECTION 1156.3 Emergencies . Banks shall not close for business during the banking days and hours as reported to the Central Bank, nor shall they open for business outside said days and hours without giving the prior written notice prescribed in Subsec. 1156.4 except when such closing or opening is due to an emergency as herein defined. For purposes of this subsection, emergency shall mean (a) condition of an area or locality proclaimed by the President of the Philippines as in a state of emergency, or (b) an event or occasion or a combination of circumstances equivalent to a public calamity resulting from fire, flood, or like disaster, or through some unusual occurrence or pressing necessity, not reasonably subject to anticipation calling for immediate action or remedy. SUBSECTION 1156.4 Reports . The prior written notice to the Central Bank on changes in banking days and hours as required in this section shall be given through the fastest means of communication, at least seven (7) banking days before the intended effectivity of the change in banking hours or days. In case a bank, due to an emergency, has to open outside, or close during, the banking hours or days reported to the Central Bank, a written report submitted within twenty-four (24) hours from opening or closing, as the case may be, will suffice. The report shall state the specific nature of the emergency and the period the bank opened or closed or shall open or close by reason of the emergency. SUBSECTION 1156.5 Existing authorizations and notifications . Except as otherwise provided hereinabove, existing authorizations and notifications regarding banking days inconsistent with the five-day banking week are hereby revoked. (Effective May 15, 1984). SUBSECTION 1156.6 Posting of schedule of banking days and hours . The schedule of banking days and hours reported to the Central Bank shall be posted conspicuously at all times in the bank's premises. SECTIONS 1157-1160. (Reserved) . I. INTERNAL CONTROL SECTION 1161. Records and Reports . All banking institutions shall have a true and accurate account, record or statement of their daily transactions, particularly those referring to their deposit liabilities. The commission of any false entry or the omission to make an entry on any such transactions shall be a ground for the Monetary Board to order the removal from office of any officer, director, agent or employee responsible therefore without prejudice to their criminal liability under Sections 33 and 34 of Republic Act No. 265, as amended, and/or the applicable provisions of the Revised Penal Code. Commercial banks, thrift banks and specialized government banks shall observe the regulations embodied in Sec. 1263 concerning the booking of deposits and withdrawals. All banks are enjoined to use and follow strictly the forms prescribed by the Deputy Governor, Supervision and Examination Sector, and as may be revised from time to time, for their statements and/or periodic reports required for submission to the Department of Commercial and Savings Banks (see Appendix 4 for list of reports required of commercial banks). All banks shall strictly adopt/implement the uniform System of Accounts prescribed in the corresponding Central Bank Manual including reportorial and publication requirements. Local branches of foreign banks may continue using their existing accounts provided that published statements and reports submitted to the Central Bank follow the account definitions established in the Uniform System: Provided , That the mathematical formulas for reconciling such published statements and submitted reports with the general ledger accounts of the bank, had been submitted to the Department of Commercial and Savings Banks on or before October 1, 1976: and Provided, further , That the bank should prepare for Central Bank use reconciliations of their ledger accounts and the standard accounts described in the Uniform System as of regular or special bank examination dates. Any commercial bank or any government bank mentioned above which fails or refuses to adopt the prescribed Uniform System or any of the applicable accounts contained therein or which uses or adopts any general ledger account not specified in the said Uniform System without prior written approval of the Governor of the Central Bank may be penalized by a suspension or revocation of its authority to engage in quasi-banking functions. All banks and non-bank financial intermediaries are hereby required to adopt the Statements of Financial Accounting Standards (SFAS) in their financial statements and reports to the Central Bank of the Philippines which are purported to be prepared in accordance with generally accepted accounting principles. The SFAS which have been approved by the Professional Regulation Commission (PRC) as of July 1983 are as follows: 1. SFAS No. 1, Basic Concepts and Accounting Principles Underlying Financial Statements of Business Enterprises; 2. SFAS No. 2, Summary of Generally Accepted Accounting Principles on Cash; 3. SFAS No. 3, Summary of Generally Accepted Accounting Principles on Receivables; 4. SFAS No. 4, Summary of Generally Accepted Accounting Principles on Inventories; and 5. SFAS No. 5, Summary of Generally Accepted Accounting Principles on Liabilities. ( Effective September 19, 1983 ). SUBSECTION 1161.1 Categories of, and signatories to, bank reports . Certain weekly, monthly, quarterly, semi-annual and annual statements/reports required to be submitted to the Central Bank by commercial banks are grouped into Category A-1, Category A-2, and Category B. a. Categories of reports 1) Category A-1 reports are the quarterly published/condensed statements of condition (CBP-7-16-03). 2) Category A-2 reports are the consolidated monthly statement of condition and the quarterly statement of condition (CBP 7-16-05 and CBP 7-16-02, respectively). 3) Category B reports are those required to be submitted to the Central Bank and which are not included in Categories A-1 and A-2. b. Authorized signatories 1) Category A-1 reports shall be signed by the institution's president or senior executive vice president and by the chief finance officer (i.e., controller or chief accountant), who shall be authorized under a resolution approved by the board of directors (sample form of resolution is shown as Appendix 5). LexLib 2) Category A-2 reports of head offices of financial intermediaries shall be signed by the institution's president or senior executive vice-president. Reports of offices/units (such as branch, sub-branch, agency, etc.) in this category shall be signed by the respective manager/officer-in-charge. The signing authority in this category shall be contained in resolution approved by the board of directors (sample of resolution is shown as Appendix 6). 3) Category B reports shall be signed by officer or their alternates, who shall be duly designated by the board of directors. A copy of the board resolution (sample form is shown as Appendix 7) covering the initial designation and subsequent change(s) in signatories as well as specimen signatures of the signatories and alternates, shall be submitted to the Department of Commercial and Savings Banks within three (3) days from date of resolution. SUBSECTION 1161.1.b.4 (Additional provision as provided by No. 3 of CBP Circular 1216 dated December 20, 1989) c. Sanctions . If a report submitted to the Central Bank under the signature of an officer who is not listed or included in any of the resolution(s) mentioned above, the Department of Commercial and Savings Banks shall refuse to acknowledge the report as valid or consider the report as not having been submitted at all. If such a report is not re-submitted by the instruction under the signature of a duly authorized signing officer, administrative sanctions/penalties shall be imposed on the * * from conducting an examination, including the act of refusing to accept or honor a letter of authority to examine presented by any officer/examiner/employee of the Central Bank. b. Fines for wilful delay in the submission of reports (1) Amount of fine Any banking institution which shall willfully delay the submission of reports, as defined above, within the periods prescribed for each particular report, shall pay a fine in accordance with the following schedule: P100 per banking day of default for the first five banking days of default; P150 per banking day of default for the next five successive days of default; P200 per banking day of default for the succeeding banking days of default. In the implementation of the foregoing rules, delay or default shall start to run on the day following the last day required for submission of the reports. However, should the last day of filing fall on a non-working day in the locality where the reporting bank is situated, delay or default shall start to run on the day following the next working day. (2) Manner of filing For the purpose of establishing delay or default, the submission of the reports shall be effected by filing them personally with the Department of Commercial and Savings Banks or with the Central Bank Regional Offices, or by sending them by registered mail or special delivery, unless otherwise specified in the circular or memorandum of the Monetary Board. In the first case, the date of acknowledgment by the Department of Commercial and Savings Banks/Central Bank Regional Offices appearing on the copies of such reports filed or submitted, and in the second case, the date of mailing postmarked on the envelope or the registry receipt, shall be considered as the date of filing. (As amended by CBP Circular 1206 dated July 17, 1989) c. Fine for refusal to permit examination (1) Amount of fine Any banking institution which shall willfully refuse to permit examination as defined above, shall pay a fine of P500 daily from the day of refusal and for as long as such refusal lasts. (2) Basis for, and effectivity of, the imposition of fine (a) The Central Bank officer/examiner/employee shall report the refusal of the banking institution to permit examination to the Department of Commercial and Savings Banks, who shall forthwith make a written demand upon the banking institution concerned for such examination. If the banking institution continues to refuse said examination without any satisfactory explanation therefor, the Central Bank officer/examiner/employee concerned shall submit a report to that effect to the said department head. (b) The fine shall be imposed starting on the day following the report by the said department of the written report submitted by the Central Bank officer/examiner/employee concerned regarding the continued refusal of the banking institution to permit the desired examination. d. Manner of payment or collection of fines . The regulations embodied in Sec. 1610 shall be observed in the collection of fines from banks for the wilful delay in the submission of reports or for refusal to permit examination. e. Other penalties . The foregoing penalties shall not preclude the application of, or be without prejudice to, the other administrative sanctions as well as to the filing of criminal case as provided for in other provisions of law, and as may be warranted by the offense. f. Appeal to the Monetary Board . Any aggrieved banking institution may appeal to the Monetary Board from a ruling of the Department of Commercial and Savings Banks imposing a fine. SUBSECTION 1161.3 Submission of certain required information . All commercial banks shall submit to the Department of Commercial and Savings Banks the information required in Appendix 8. Any changes in any of the required information submitted, after the initial submission, shall be reported to the Department of Commercial and Savings Banks immediately. All commercial banks shall likewise submit to the said Department any or all of the documents/information enumerated in Appendix 9. Any subsequent changes/issuances should be furnished the Department within fifteen (15) days from such change/issuance. SUBSECTION 1161.4 Reports on crimes/losses . All banks shall report on the following matters through the appropriate supervising and examining department: a. Crimes whether consummated, frustrated or attempted against property/facilities (such as robbery, theft, swindling or estafa, forgery and other deceits) and other crimes involving loss/destruction of bank property when the amount involved for commercial banks, including specialized government banks, in each crime is P20,000 or more. Crimes involving bank personnel, even if the amount involved is less than those above specified, shall likewise be reported to the Central Bank whenever the bank initiates judicial or extrajudicial action, or imposes sanctions against such bank personnel. (As amended by CBP Circular 1268 dated December 28, 1990) b. Incidents involving material loss, destruction or damage to the institution's property/facilities, other than that arising from a crime, when the amount involved per incident for commercial banks, including specialized government banks, is P100,000 or more. c. The following guidelines shall be observed in the preparation and submission of the report: 1) The report shall be prepared in two copies and shall be submitted within forty-eight (48) hours from knowledge of the crime or incident with the details contained in CBP-7-16-20, the original to the appropriate supervising department and the duplicate copy to the Central Bank Security Coordinator, thru the Director of Security and Transport: Provided , That in the cases mentioned in the second paragraph of Item a, the report shall be submitted as specified above, within forty-eight (48) hours from initiation of judicial or extrajudicial action or from the imposition of sanctions against such bank personnel. 2) Where a thorough investigation and evaluation of facts is necessary to complete the report, an initial report submitted within the 48-hour deadline may be accepted: Provided , That a complete report is submitted not later than fifteen (15) days from termination of investigation. 3) Proof of submission of the report within the 48-hour deadline shall be determined by the date of postmark, if the report was sent by mail or by the date received, if hand-carried to the appropriate supervising and examining department, Manila, or in applicable cases, to the unit of the supervising and examining department in any of the Regional Offices of the Central Bank. (As amended by No. 1 of CBP Circular 1216 dated December 20, 1989) SUBSECTION 1161.5 Report on real estate transactions between a bank and its directors, officers, stockholders or any firm substantially owned by one or more of such directors, officers or stockholders . The board of directors shall, through the appropriate supervising and examining department of the Central Bank: a. Report to the Monetary Board any real estate transactions (such as, but not limited to, rentals or leases, purchases and sales, or foreclosed assets) by and between the bank and its director(s), officer(s), stockholder(s) owning at least two per cent (2%) of the bank's subscribed capital stock or any firm substantially owned (in the aggregate of at least twenty per cent (20%) of the paid-in capital of such firm) by one or more of such directors/officers/stockholders; and b. Certify to the Monetary Board that such transaction has been thoroughly reviewed and verified as having been entered into in the best interest of the bank. SUBSECTION 1161.6 Computation of "Due from CB " account for reporting purposes . The balance of the "Due from Central Bank of the Philippines" account when used in the computation of: a. available reserves against 1) marginal deposits on import letters of credit, 2) deposit substitutes/interbank loans and 3) deposit liabilities; and b. penalty on reserve deficiencies shall be based on the books of the Accounting Department of the Central Bank, net of returned checks delivered to/received from the Central Bank clearing as provided under existing regulations. To implement this policy, the following guidelines for reporting shall be observed: a. Banks which have adopted the Consolidated Daily Report of Condition (CDRC) shall continue to report their book balances of "Due from Central Bank of the Philippines" account in this report. The central Bank shall observe the aforementioned policy in computing available reserves from the CDRC. b. Banks which have not yet adopted the CDRC shall use the Central Bank book's balance of their "Due from Central Bank of the Philippines" account in the following report forms: 1) Consolidated Report of Required and Available Reserves Against Deposit Liabilities (CBP 7-16-01) for commercial, private development and specialized government banks; 2) Marginal Deposits on Import Letters of Credit and Reserves Against Them (CBP 7-16-14); and 3) Consolidated Report on Required and Available Reserves Against Deposit Substitutes (CBP 7-16-22 for commercial and specialized government banks authorized to engage in quasi-banking functions). c. The Accounting Department of the Central Bank shall furnish banks with the periodic balances of their demand deposit accounts in accordance with the schedule and frequency to be mutually agreed upon with the banks concerned. SUBSECTION 1161.7 Reconciliation of head office and branch transactions . All banking institutions shall prepare monthly reconciliation statements covering transactions between the head office and all its branches within fifteen (15) days after the end of each month. All items which are unresponded or outstanding in the reconciliation statement for more than six (6) months as of reconciliation statement date shall be reported, with explanations/reasons for their being outstanding, to the Department of Commercial and Savings Banks within the next fifteen (15) days after the deadline set in the preceding paragraph. The reconciliation statement shall be made available to any duly authorized bank examiner for inspection/examination without need of advance notice. A copy of the year-end reconciliation statement covering transactions between a bank's head office and all its branches shall be furnished the Department of Commercial and Savings Banks not later than the end of January of the following year. SUBSECTION 1161.8 Statement of departmental profit and loss Banks are enjoined to maintain a system/record of income and expense allocation on a departmental basis and to prepare departmental profit and loss statements observing commonly used and generally accepted accounting principles. The statement shall be submitted to the Department of Commercial and Savings Banks on a quarterly basis, within thirty (30) days after the end of the quarter. Data should be submitted covering at least the following activities, if undertaken by the banks: (a) loans and discounts, (b) investments, (c) international operations, (d) trust operations, and (e) quasi-banking activities. SUBSECTION 1161.9 List of stockholders and their stockholdings . The following provisions shall govern the preparation and submission of report form CBP-7-16-11 (List of Stockholders and Their Stockholdings): a. Banks shall submit in duplicate to the Department of Commercial and Savings Banks annually a complete list of stockholders and their stockholdings and all other relevant information called for in the report form CBP 7-16-11 within twelve (12) banking days from the beginning of each calendar year. b. Any change (either by replacement, addition or cancellation) in the above original list shall be reported quarterly to the Department of Commercial and Savings Banks not later than seven (7) banking days after the end of each quarter, specifying therein the name(s) and/or stockholdings involved which is/are to be cancelled or replaced, and the new name(s) and/or stockholdings which shall be included for that quarter. In case no change(s) occurred during a particular quarter, the report shall provide a notation, viz: "No change(s) since last report submitted for the quarter ended _________, 19_____". SUBSECTION 1161.10 Report on loans and other credit accommodations aggregating P1 million and above . Item No. 2 of Letter of Instructions No. 1107 dated February 16, 1981 provides that: "A credit information exchange system shall be initiated by the Central Bank of the Philippines, which shall provide data on bank borrowings, commercial paper issuances and other forms of borrowing, to banks and other financial institutions. The data shall be obtained from financial institutions and shall be released on an exchange arrangement, after the appropriate summarization and classification of data." In this connection, all banks except rural banks shall submit a report (CBP 7-16-35) of their exposure in the form of Loans, Commercial Papers Receivables and Bonds Purchased/Sold (Excluding Government Securities Purchased Outright), Lease Contracts Receivable, Equity Investment, Stand-by Letters of Credit/Guarantee, Regular and Deferred Letters of Credit/Authority to Purchase (Domestic and Import), and Commercial Papers/Receivables Sold on a Without Recourse Basis to individuals, companies or groups of companies. The Trust Department and/or Investment Management Division shall submit similar reports. The frequency of reporting and the bench-marks on amounts to be reported are as follows: P20 million and above exposure every first and second month of the quarter; and P1 million and above exposure every end of the quarter. Reports as of the end of every quarter, i.e., exposure aggregating P1 million and above, shall be submitted to the Department of Loans and Credit (DLC) on or before the 15th banking/business day following the reference quarter. However, reports as of the end of every first and second month of the quarter, i.e., exposures aggregating P20 million and above, shall continue to be submitted to the DLC on or before the 10th banking/business day following the reference month. The total assets and net worth required to be reported in Annex A of the above-mentioned reports need not be reported again if the audited financial statements of the individual or company concerned are the same as the last report. Institutions that do not have exposures to individuals, companies or groups of companies aggregating P20 million and above may simply submit a letter stating that they do not have such large exposures as of the end of the quarter concerned. The reports submitted by the banks and NBFIs concerned shall be summarized and an information exchange arrangement shall be developed in cooperation and coordination with the industry associations, i.e., Bankers Association of the Philippines, Chamber of Thrift Banks, Investment Houses Association of the Philippines and Philippine Association of Finance Companies. Any financial institution, whether or not engaged in quasi-banking functions, which shall willfully delay the submission of the report on its exposures to individuals, companies or groups of individuals/companies, shall pay the amount of fine provided in Subsec. 1161.2. The manner of payment or collection of the fines shall be as follows: a) Where the financial institution maintains a deposit account with the Central Bank, its deposit account shall be debited immediately by the Accounting Department of the Central Bank upon receipt of notice from the Department of Loans and Credit. A copy of said notice shall be attached to the debit advice furnished the bank concerned. b) Where the financial institutions do not have deposit account with the Central Bank or where the deposit accounts balances with the Central Bank are insufficient to cover the amount of fines involved, said institutions shall be billed immediately by the Central Bank Accounting Department upon receipt of notice from the Department of Loans and Credit. Failure to effect the settlement of the full amount of the fines within a period of thirty (30) days from receipt of the bill shall make them subject to the penal provisions of Republic Act No. 265, as amended. SUBSECTION 1161.11 Central Bank offices where reports are submitted . Submission of DCSB periodic/call reports shall be as follows: a. All banking offices (except those located in Cebu and Davao cities) shall submit required reports (original and duplicate) direct to the Department of Commercial and Savings Banks, Manila, either by messenger, or by mail addressed to: DEPARTMENT OF COMMERCIAL AND SAVINGS BANKS Central Bank of the Philippines P.O. Box 616, Manila b. All banking offices located in Cebu City and Davao City shall submit both the original and the duplicate of required reports direct to the respective Central Bank Regional Offices located in said cities. c. Where a particular report form calls for distribution of copies to other departments of the Central Bank, the bank concerned shall furnish said copies of the report direct to the respective department of the Central Bank. d. As an exception to Item a above, the duplicate form for the bio-data for directors/officers (CBP 7-16-18 KB) shall be submitted to the Supervisory Reports Office of the Central Bank. SUBSECTION 1161.12 Manner of and deadline for submission of reports a. Regular Reports on the Various DCSB Forms . Original report is to be submitted to the respective regional office; duplicate to the Department of Commercial and Savings Banks. b. " Call " Reports . The manner of submission shall be as specified in the letter calling for the report. c. Replies to Letters Emanating from the DCSB (Manila) . These shall be addressed and sent direct to the Department of Commercial and Savings Banks, Central Bank. The deadlines for submission of reports enumerated in Appendix 4, both periodic and non-periodic, which are being submitted/to be submitted by banks to the Department of Commercial and Savings Banks, Central Bank, shall be reckoned on the basis of banking days instead of on calendar days . For this purpose, banking days shall be understood to mean Monday thru Friday or banking days of the Central Bank. SUBSECTION 1161.13 Consolidated financial statements of investor-financial institution and its subsidiaries/affiliates The following guidelines shall govern the consolidation of financial statements of financial intermediaries (banks and non-banks performing quasi-banking functions) and their allied undertakings/subsidiaries/affiliates. a. Definitions For purposes of this subsection, the definitions of the following terms are hereby adopted: 1) Consolidated financial statements shall refer to the combined statement of condition/balance sheet and statement of income and expenses of two or more corporate entities as they would appear if they were one organization, after eliminating the effects of inter-company transactions. 2) Financial allied undertakings refer to enterprises or firms with homogenous or similar activities/business/functions with the financial intermediary and may include but not limited to leasing companies, banks, investment houses, financing companies, credit card operations, financial institutions addressed/catering to small and medium scale industries, and such other similar activities as the Monetary Board may declare as appropriate from time to time. 3) Non-financial allied undertakings may include but not limited to warehousing companies, storage companies, safe deposit box companies, companies engaged in the management of mutual funds but not in the mutual funds themselves, management corporations engaged or to be engaged in activities similar to the management of mutual funds, insurance agencies, companies engaged in home building and home development and companies providing drying and/or including facilities for agricultural crops such as rice and corn and such other similar activities as the Monetary Board may declare as appropriate from time to time. 4) Equity investments refer to investments in the capital stock of companies, firms or enterprises, made for purposes of control, affiliation or other continuing business advantage. 5) Subsidiary refers to a corporation or firm more than 50% of the outstanding voting stock of which is directly or indirectly owned, controlled or held with power to vote by a financial intermediary (bank and non-bank). A domestic subsidiary is any subsidiary domiciled in the Philippines and incorporated under the laws of the Philippines, while a foreign subsidiary is any subsidiary incorporated and organized under the laws of a foreign country. 6) Affiliate refers to an entity linked directly or indirectly to a financial intermediary by means of (a) ownership, control or power to vote, of 10% or more of the outstanding voting stocks of the entity, or vice-versa; (b) interlocking directorship or officership; (c) common stockholders owning 10% or more of the outstanding voting stocks of each of the financial intermediary and the entity; (d) management contract or any arrangement granting power to the financial intermediary to direct or cause the direction of management and policies of the entity, or vice-versa; or (e) permanent proxy or voting trust in favor of the financial intermediary constituting 10% or more of the outstanding voting stocks of the entity, or vice-versa. 7) Cost method refers to the accounting method of recording at cost, and continuously carrying at cost, equity investment, regardless of increases or decreases in the underlying value of the investments resulting from earnings or losses of the allied undertaking/affiliate/subsidiary. 8) Equity method refers to the accounting method of recording equity investments at cost and adjusting the balance of the account to reflect increases or decreases in the underlying value of the investments resulting from earnings or losses of the allied undertakings/affiliate /subsidiary. cdta b. Consolidation requirements 1) The financial statements of allied undertakings shall be consolidated with those of the investing financial intermediary only when the allied undertaking is a subsidiary and a financial allied undertaking as defined herein. 2) In the case of non-financial allied undertakings and affiliates, consolidation may be required on a case-to-case basis as may be determined by the appropriate supervising and examining department of the Central Bank. 3) Financial statements of all domestic and foreign subsidiaries shall be consolidated with those of the investing financial intermediary (domestic parent), except a) subsidiaries about to be disposed of; b) subsidiaries where control is being exercised on a temporary basis; c) subsidiaries whose financial statements bear a closing date different from that of the investing financial intermediary's financial statements and/or (i) the difference in closing dates exceeds three months or more; (ii) The closing dates of all the statements are not expressly indicated; (iii) the necessity of the difference to closing date is not explained; and (iv) changes in accounting periods of the affiliate/constituent companies are not disclosed, together with their financial statements. d) subsidiaries whose business activities are so dissimilar from those of the investing financial intermediary that the presentation of separate financial statement would provide better information; and e) foreign subsidiaries located in places where i) there are foreign exchange restrictions; ii) the rates of exchange fluctuate widely; iii) there are unfavorable legislations in force; and iv) the foreign government concerned is undergoing a process of change. c. Consolidation procedures 1) Consolidation of the financial statements shall involve the following procedures: a) Consolidation shall be on a line-by-line basis; i.e. accounts of the investing financial intermediary and its subsidiaries to be consolidated are combined by adding together like item of assets, liabilities, revenue and expenses, except in the case of foreign currency of the host country where the allied undertaking/subsidiary/affiliate is located, which shall be shown under "Other Assets." b) The following are eliminated in consolidation: (i) All intercompany transactions; for instance, rental income of a subsidiary from its premises should be netted against rent expense incurred by the investing financial intermediary for occupying said premises; (ii) All intercompany accounts/transactions that reflect the existence of a debtor-creditor relationship between the investing financial intermediary and its subsidiaries and/or between subsidiaries. (iii) All asset accounts of the investing financial intermediary, which represent ownership of investments in subsidiaries against the capital accounts of the consolidated subsidiaries. c) All income and expense accounts shall be closed to the capital accounts of each subsidiary. d) All the remaining assets and liabilities of the subsidiaries shall be transferred to appropriate accounts of the investing financial intermediary. e) For not wholly-owned subsidiaries, segregate the share of minority stockholders/interest in the capital stock and retained earnings of such subsidiaries and lodge the same under "Minority Interest in Subsidiary" account which shall be shown as a separate section between the Liabilities and Stockholders' Equity sections of the Consolidated Statement of Condition. f) Other generally accepted consolidation principles/procedures not inconsistent herewith may be adopted. g) Consolidating adjustments and eliminations shall appear only on working papers and shall not be recorded in the books of the individual entities concerned. 2) For consolidated statement/report purposes, the following accounts shall be used for the differences between cost and book value of equity investments on date of acquisition: a) Excess of Cost Over For excess of cost of Book Value of Equity equity investments over Investments its book value b) Excess of Book For the excess of book Value Over Cost of value of equity investment Equity Investments over its cost The first account shall be shown under OTHER ASSETS caption while the second account shall be shown under the caption UNEARNED INCOME AND OTHER DEFERRED CREDITS in the Consolidated Statement of Condition. 3) The investments (which are recorded at the cost method) of the investing financial intermediary in allied undertaking/subsidiaries/affiliates whose financial statements are not consolidated shall be adjusted for their share in the earnings or losses of such entities, with the use of the equity method as defined in a (8), hereof. However, these adjustments shall appear only in working papers and shall not be recorded in the books of the individual entities concerned. d. Disclosures The following schedules/disclosures shall be attached to/made in the consolidated financial statements: 1) An appropriate list/schedule of the allied undertakings/subsidiaries/affiliates showing the following information: a) Name and nature of business; b) Original cost of the investment, outstanding balance, book value and difference, if any, and accounting treatment of the difference; c) Percentage of ownership/equity investment; d) Differences in reporting dates from that of the reporting financial intermediary; e) Whether or not their financial statements have been consolidated; and f) Reasons for not consolidating in the case of the unconsolidated entities. cdti 2) Where the unconsolidated subsidiaries are, in the aggregate, material/significant in relation to the consolidated financial position or operating results, summarized information as to their assets, liabilities and operating statements should be presented/indicated/shown in footnotes, or separate financial statements should be presented for such subsidiaries, either individually or in groups, where appropriate. 3) Any information on: a) Exposure to exceptional risks of operating in other countries, including the risk of foreign currency exchange rate fluctuations. b) The extent to which there are statutory or contractual restrictions on the distribution of the accumulated retained income of the group. e. Submission of financial statements The investing financial intermediary shall, within one hundred twenty (120) days after the end of the reference calendar year, that is, on December 31 of each year, submit to the appropriate supervising and examining department of the Central Bank the consolidated annual financial statements which shall be supported with the individual annual financial statements of the allied undertakings/affiliates/subsidiaries in the prescribed report. The strict implementation of these guidelines or full compliance therewith, subject to penalties/sanctions, shall be effective January 1, 1983. SUBSECTION 1161.14 Reports required of foreign subsidiaries/affiliates of domestic banks . The following revised guidelines shall be observed by all domestic banks governing the submission of periodic reports by the foreign subsidiary/affiliate or non-bank entities: a. For foreign subsidiary firms wholly or majority-owned by domestic banks, the local investor bank(s) concerned shall regularly submit to the appropriate supervising and examining department of the Central Bank a quarterly statement of condition and semestral report of income and expenses concerning the operations of the foreign subsidiaries, including such other periodic reports which may be required from time to time in the forms prescribed by the Central Bank for domestic financial intermediaries to the extent that their operations are applicable; b. For foreign affiliates which are minority-owned by domestic banks, the appropriate supervising and examining department shall be furnished by said domestic banks copies of the annual report prescribed by any of the regulatory authorities in the country of operations, such as the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, the Comptroller of the Currency and other agencies performing similar functions; and c. When material changes noted in the annual financial statements warrant an interim comprehensive evaluation, the foreign affiliate concerned shall be requested to submit to the appropriate supervising and examining department thru its domestic investor bank copies of its quarterly/interim reports to stockholders or the call reports in the case of U.S. banks. SUBSECTION 1161.15 Report on outstanding equity investments in and outstanding loans to non-allied enterprises . Pursuant to the provisions of Subsec. 1380.3, all banks with expanded commercial banking authority shall submit to the Department of Commercial and Savings Banks (DCSB), Central Bank of the Philippines, a report as of June 30 and December 31 of each year showing the following: a. Their outstanding equity investments in non-allied enterprises. b. Outstanding equity investments of their wholly or majority-owned subsidiaries in non-allied enterprises. c. Their outstanding loans to non-allied enterprises in which they have equity investments. d. Outstanding loans of their wholly or majority-owned subsidiaries to non-allied enterprises in which these wholly or majority-owned subsidiaries have equity investments. e. Their outstanding loans to non-allied enterprises in which their wholly or majority-owned subsidiaries have equity investments. The report shall be submitted within fifteen (15) banking days from date of report. For purposes of this subsection, a wholly-owned subsidiary is a corporation 100% of the voting stock of which is owned by the reporting bank while a majority-owned subsidiary is a corporation more than 50% but less than 100% of the voting stock of which is owned by the reporting bank. SUBSECTION 1161.16 Report on the volume of and weighted average interest rates on deposits and loans . Data on the volume of transactions and weighted average interest rates on time certificates of deposits (TCDs) and secured/unsecured loans granted, classified by maturity, and outstanding savings deposits classified by interest rates, shall be prepared daily (except data on savings deposits which shall be prepared weekly) and submitted weekly by all head offices of commercial and expanded commercial banks to the Department of Economic Research (DER), Central Bank of the Philippines, under form CBP 5-17-33 (October, 1981) not later than 4:00 p.m. on Thursday after end of reference week. SUBSECTION 1161.17 Reports of extension offices Extension offices of banks which maintain separate books of accounts shall be subject to all reporting requirements of a regular branch. Extension offices of banks whose record of transactions/accounts are consolidated daily with its mother unit shall submit only the "Selected Financial Accounts" form which is listed in Appendix 4 as CBP-7-16-02KB-A. SECTIONS 1162-1164. (Reserved) . SECTION 1165. Audits . The boards of directors of banking institutions whose primary responsibility is to exercise general supervision over the affairs of their banks, in order to determine whether operations are carried out with maximum effectiveness and economy, are hereby required to cause once every two (2) years for commercial banks and specialized government banks, an operations/management audit or an overall review and appraisal of management methods and performance, specifically on plans and objectives, organizational structure, systems or procedures, methods of control, means of operation, human and physical facilities, to deliberate and act on the audit report; and to submit a report (with special emphasis on management performance, policies and procedures) on the Board's actions to the Central Bank. Such operations/management audit shall be conducted simultaneously with the financial audit. The financial audit shall, however, be conducted annually. The board of directors of each bank is required to submit before the start of the audit to the appropriate supervising and examining departments of the Central Bank, for its approval, an audit program. The audit program should indicate in detail, the scope and coverage of the audit to be conducted. In cases where the audit program will not cover certain specific requirements of this subsection, the board of directors of the bank shall submit its justification therefor. SUBSECTION 1165.1 Who may conduct . The operations/management audit may be made by the bank's Board of Directors, the bank's internal auditor, or responsible employees of the bank or by the bank's external auditor hired to make the annual financial audit: Provided , That said directors, internal auditor, responsible employees or external auditor possess the education, training and experience to perform an operations/management audit; and Provided, further , That the Monetary Board may, at its discretion, require the bank's board of directors to engage the services of an independent operations/management auditor acceptable to the Monetary Board. SUBSECTION 1165.2 Minimum coverage . The operations/management audit shall at least cover the following aspects which should be specified in the written instructions of the Board to the party commissioned to make the operations/management audit: a. A review of past year's managerial/operational performance; b. A review of bank policies and practices; and c. An overview of operations, prospects and plans for the coming year (when required). SUBSECTION 1165.3 Minimum contents of audit reports . The operations/management audit report shall contain a discussion of the following aspects (this requirement shall also be mentioned in the written instructions of the Board): a. Past Year's Managerial/Operational Performance 1) A general review and appraisal of past year's operational performance on the basis of the long-range plans, objectives, specific targets and strategies set forth at the start of the year; whether operations were carried out with maximum effectiveness, economy, and made in accordance with banking laws, rules and regulations. cdtech 2) An evaluation of the quality of management and executive performance based on adequacy of the organizational structure, staffing, policy and decision-making process, staff development program and compensation structure, accuracy and reliability of controls, satisfactory methods of operation, adequacy and maximum utilization of manpower and physical facilities, existence of standards of performance and measurement of results, adequacy of protective methods, whether there are existing operational weaknesses and pitfalls. 3) An evaluation of the bank's general financial condition, liquidity, solvency and profitability including the following aspects: a) An evaluation of the bank's loan and investment portfolio covering (i) industry exposure to economic interest-blocks; (ii) regional exposure, (in) collection experience and (iv) collateral business. b) An evaluation of the bank's fund sources including cost of capital. b. Bank policies, practices and procedures 1) An evaluation of the policies, practices and procedures on loaning, investment and money market operations, whether they are sound and safe, well-defined and clearly stated, flexible and attuned to the economic conditions of the country, and whether there is need for change or shift in such policies, practices and procedures. 2) A descriptive statement of relationships with subsidiaries, affiliated entities, holding companies, if any, and plans with respect to same. c. Projection, Prospects and Plans 1) A narrative statement of the bank's long-range plans, objectives or goals. 2) A narrative statement of specific targets and general strategy for the incoming year based on past year's performance, long-range bank plans and objectives highlighting possible opportunities. 3) Two to three-year programs of capital and deposit build-up, and decrease in borrowings and money market activities which are high-cost sources of funds. 4) Prospects of adopting new ideas, new development and new types of equipment. The aspects of the operations/management audit report described under this item will be required only when any or all of the following conditions or circumstances exist in the operations of the bank as may be determined by the Department of Commercial and Savings Banks: a) Deterioration of financial condition; b) Existence of liquidity and solvency problems; c) Decreasing profits or incurrence of losses; d) Existence of management problems; e) Over extension of credit including loans to directors/officers/stockholders/related interests (DOSRI); f) Capital deficiency; g) Decreasing trend in deposit operations; h) Heavy borrowings; and i) Over-indulgence in money market activities as fund sources. d. The operations/management audit report shall contain a full description of the methodology followed and the names of the audit team members. The appropriate supervising and examining department of the Central Bank, at its discretion, shall specify the conditions and coverage of individual bank's operations/management audit report in certain instances where specific problem areas are identifiable. SUBSECTION 1165.4 Exemption . The Governor of the Central Bank may waive the operations/management audit requirement upon request of the institution with the concurrence of the Department of Commercial and Savings Banks: Provided , That the request of the institution is justified and supported by a showing of managerial capability and a sound and stable financial condition. SUBSECTION 1165.5 Procedural guidelines a. Each bank shall cause an annual financial audit as required under Section 6-D of Republic Act No. 337, as amended, not later than thirty (30) days after the close of the calendar year or the fiscal year adopted by the bank. Reports on such audits shall be made separately and submitted to the board of directors and the appropriate supervising and examining department of the Central Bank not later than ninety (90) days after the start of such audit. b. The board of directors, in a regular or special meeting, shall consider and act on the operations/management audit and financial audit reports and shall submit, within 30 days after receipt of the reports, a copy of its resolution to the appropriate supervising and examining department of the Central Bank. The resolution shall show, among other things, the names of the directors present and absent, the actions taken on the findings and recommendations as well as the measures adopted by the board of directors to improve or update the bank's managerial/operational performance, policies and practices, and its systems and procedures. c. The next operations/management audit for commercial banks and specialized government banks shall be conducted after the close of calendar/fiscal year 1982, and every two years thereafter. (As amended by Section 1 of CBP Circular 1124 dated December 5, 1986) SECTION 1166. Internal Control System . The following provisions are the minimum internal control standards for banks to help promote an effective control system. For this purpose, the following records/data shall be compiled and made available for the inspection of Central Bank examiners: a. Records showing compliance with independent balancing procedures. These records should indicate the accounts and the periodic balancing procedures performed. b. Statements of actual duties of persons assigned to handle cash and securities. c. All internal control audit reports or their equivalent. d. Information/data on the direct and/or indirect equity holdings and/or connection with any firm, partnership or corporation organized for profits, of all the bank's directors, officers and major stockholders as defined under Subsec. 1326.1 should be maintained. SUBSECTION 1166.1 Proper accounting records a. All banks should maintain proper and adequate accounting records. b. These records should be kept currently posted and should contain sufficient detail so that an audit trail is established. c. All tickets should bear official approval and should be initialed by the person originating and another person checking them. SUBSECTION 1166.2 Independent balancing a. Independent balancing shall mean that records posted by a person or cash held by a teller or cashier shall be balanced or counted by another person. b. The minimum independent balancing procedures which should be adopted are the following: 1) Monthly reconciliation of general ledger balances against their respective subsidiary and supporting records and documentations by someone other than the bookkeeper or the person handling the records. 2) Irregular and unannounced count of teller's cash and checks and other cash items at least twice a month and vault cash at least once a month by the auditor/control officer or by an officer not connected with the cash department. 3) Monthly reconciliation of due from banks/cash in banks accounts (domestic and foreign) and due from/to head office/branches by someone other than the person handling the records or posting the general ledger entries. 4) Periodic verification of securities and collaterals by someone other than their custodian. 5) Periodic verification of the accuracy of the interest credits to deposit liabilities accounts. SUBSECTION 1166.3 Division of duties and responsibilities a. The duties of all the officers and employees should be segregated, clearly defined, understood, documented and manualized if possible. No individual shall have complete authority and responsibility for handling all phases of any transaction from beginning to end, without some check or balance from some other part of the organization. b. The physical handling of a transaction should be separated from its recording and supervision as follows: 1) A person handling cash should not be permitted to post the ledger records nor should posting of the general ledger be performed by an employee who post the depositor's subsidiary ledgers. 2) A loaning officer should never be allowed to disburse proceeds of notes, accept note payment nor process loan ledgers. 3) The functions of issuing, recording and signing of drafts/checks should be separated. 4) Checks and other cash items should be maintained either by an employee not handling cash or by the Rack/Distributing Department provided that adequate control as to custody and disposition of funds are properly maintained. 5) The receipt of statements from depository bank should be assigned to an employee other than the one connected with the preparation, recording and signing of bank drafts. 6) Custodians of securities should not be allowed to handle security transactions. 7) Collateral appraisals should be done by an employee/officer other than the ones approving the loans. 8) Incoming checks and other cash items should be recorded chronologically in a register by an employee other than the bookkeeper before they are forwarded for posting purposes. 9) Credit reports should be obtained by someone other than lending officers. 10) Mailing of customers' statements and delinquent notices should be done by an employee other than the one who granted the loan or the one handling the records. 11) Dispatching and delivery of current account statements should be done by someone other than those who have something to do with current account operations such as tellers and bookkeepers. 12) Extensive background checking of persons intended to be assigned to handle cash and securities should be conducted. Frequent follow-up checking after their employment should also be made. SUBSECTION 1166.4 Joint custody a. Joint custody shall mean the processing of transactions in the presence of and under the direct observation of a second person. Both persons shall be equally accountable for the physical protection of the items and records involved. b. Physical protection should be deemed established through the use of two locks or combinations on a file chest or vault compartment. c. Two or more persons should be assigned to each half of the control so that operating efficiency is not impaired if one person is not immediately available. d. Persons who are related to each other within the third degree of consanguinity or affinity should not be made joint custodians. e. The following should be under joint custody: 1) Cash in vault 2) All accountable forms 3) Collaterals 4) Securities 5) Documents of title and/or ownership of properties or fixed assets 6) Dormant or inactive deposit ledgers and corresponding signature cards 7) Import documents 8) Trust receipts 9) Collection items 10) Duplicate keys, safe deposit, spare locks and keys, unrented keys to safe deposit boxes 11) Safekeeping items 12) Vault doors and safe combinations 13) Unissued specimen signature books 14) Test key fixed numbers unissued 15) Correspondent's and institution's own telegraphic or cable test keys currently in use. SUBSECTION 1166.5 Signing authorities . Signing authorities for the different levels of officers to sign for and in behalf of the institutions should be approved by the board of directors and the extent of each level of authority should be clearly defined. This signing authorities should include but need not be limited to the following: a. Lending b. Investment c. Approval of expenses d. Various supervisory reports e. Bank drafts, manager's/cashier's checks, bank money orders and certificate of time deposits. SUBSECTION 1166.6 Dual control a. Dual control shall mean the work of one person is to be verified by a second person to determine (1) that proper authority has been given to handle the transaction (2) that the transaction is properly recorded, and (3) that proper settlement of the transaction is made. b. The routine of each transaction should be designed so that at least two or more individuals are involved in the completion of every transaction. c. The following accounts/transactions should be under dual control: 1) Cashier's/Manager's checks and Telegraphic Transfers The signature of at least two officers should be required in the issuance of cashier's/manager's checks and telegraphic transfers. The board of directors may, however, prescribe a certain predetermined amount by which one senior officer could sign checks for telegraphic transfers, subject to appropriate control measures. 2) Certificates of Time Deposits All certificates of time deposits issued should be signed jointly by two authorized officers. 3) Bank Drafts The signature of two authorized officers should be required in the issuance of bank drafts. 4) Borrowing The signature of at least two authorized officers should be required. 5) All transactions giving rise to "due to" "due from" or "due from" account and all instruments of remittances evidencing these transactions particularly those involving substantial amounts should be approved by two authorized officers. SUBSECTION 1166.7 Number control a. Sequence number controls should be incorporated in the accounting system and should be used in registering notes, in issuing official checks and in other similar situations. Number control should be policed by a person designated by senior management who should be detached from the particular operations involved. b. The following are the forms, instruments and accounts that should be number-controlled: 1) Bank drafts 2) Manager's and/or Cashier's checks 3) Promissory notes 4) Savings deposit accounts 5) Demand deposit accounts 6) Time deposit certificates 7) Letters of credit 8) Collection items 9) Official and provisional receipts 10) Certificates of stocks 11) Loan accounts 12) Expense vouchers SUBSECTION 1166.8 Rotation of duties a. The duties of personnel handling cash, securities and bookkeeping records should be rotated. b. Rotation assignment should be irregular, unannounced and long enough to permit disclosure of any irregularities or manipulations. c. Tellers should be relieved of their duties during the actual count of their cash accountabilities performed during annual bank examinations. SUBSECTION 1166.9 Independence of the internal auditor a. The position of internal auditor should be provided for in the by-laws together with the duties and responsibilities, scope and objectives of internal auditing. b. The internal auditor should report directly to the Board of Directors or to an Audit and Examining Committee composed of directors who are not connected with the management. c. The internal auditor should not install nor develop procedures, prepare records or engaged in other activities which he normally reviews or appraises. SUBSECTION 1166.10 Direct verification a. Direct verification shall mean the confirmation of accounts or records by direct correspondence with the institution's customers. b. The following accounts, among others, should be subject to direct verification by the internal auditing staff at least once a year: 1) Balances of loans and credit accommodations of borrowers. 2) Deposit account balances particularly new deposit accounts, inactive or dormant accounts and close accounts. 3) Outstanding balances of borrowings and other liabilities. 4) Outstanding balances of receivables/payables. SUBSECTION 1166.11 Other internal control standards a. Deposit Accounts 1) Entries to dormant account ledgers should be verified and approved by a designated officer. His initials should be placed next to the entry on the ledger sheet. 2) Dormant accounts should be segregated from active account ledgers with a separate subsidiary control. 3) Signature cards for dormant accounts should be removed from active files. 4) All new current accounts should be approved by a designated officer. 5) Signature cards and deposit ledger sheets should be authenticated by some form of validation. Subsequent changes should also be validated. 6) Signature cards and deposit ledger sheets should be accessible only to authorized persons. 7) Dates appearing on deposit tickets should be occasionally examined at irregular intervals after they have been posted to determine that posting was made on the actual date deposit is received. 8) Withdrawals against uncleared check deposits should be allowed only upon prior approval of a responsible officer within the limits of authority set by the board of directors. However, rural banks should not under any circumstances, allow withdrawals against uncleared check deposits. 9) Checks should be cancelled as soon as they have been paid and posted. 10) Reports on closed accounts and returned checks should be prepared daily. 11) All current account statements should be mailed direct to the depositors. Undelivered statements should be retained by an organizational unit not responsible for demand deposit account processing. 12) An officer should be designated to attend to customers who report differences on their statements. 13) Checkbooks should be issued only against requisition forms signed by an authorized signatory to the account. b. Miscellaneous 1) Loan applications and related documents should be spot checked to insure their authenticity, including verification of name, residence, employment and current reputation of the borrower. 2) Employees paying checks for strangers should obtain positive identification of the person and when a large sum is involved, the account on which the check is drawn should be verified. 3) No employee should be permitted to process transaction affecting his own account. 4) Tellers and other employees having contact with customers should be prohibited from preparing deposit ticket or other records for the customer. 5) All banks should have a sound recruitment policy since internal control begins from point of hiring. SUBSECTION 1166.12 Internal control procedures for dormant/inactive accounts a. Definition of dormant or inactive accounts 1) Current or checking accounts showing no activity (deposit or withdrawal) for a period of one year. 2) Savings accounts showing no activity (deposit or withdrawal) for a period of two years. b. Procedure for classification Initially, review all deposit ledgers and segregate accounts that fall under Items a (1) and a (2) above. At the end of every semester thereafter, review all deposit accounts and segregate those accounts that became dormant during the semester just ended. c. Internal Control Measures 1) As a matter of policy, banks should exert all efforts to prevent checking and savings accounts from becoming dormant. When it becomes apparent that an account is inactive, a short letter should be sent to the depositor encouraging him to use his account. In case of checking accounts, the bank should exert effort to assure itself that the monthly statement of accounts reach the depositors. If the depositors cannot be located, the following steps should be undertaken: a) Check any significant changes or fluctuations in the depositors' account balance over a period of time with emphasis on accounts with decreasing balances. b) Verify apparent reactivation entries, represented either by deposit or withdrawal, that appears to have prevented the account from being classified as dormant. c) Investigate any obvious alteration of the ledger records. 2) Segregated dormant accounts should be placed under joint custody of two responsible officers/employees. 3) A separate ledger control for dormant accounts should be maintained. 4) Signature cards for dormant accounts should also be segregated from active files and held under joint custody. 5) Entries to dormant account ledgers should be verified and approved by a designated officer. His initials should be placed next to the entry on the ledger sheet. 6) All inquiries on dormant accounts should be coursed to one officer who should obtain sufficient identification from the inquirer to assure that he is entitled to the information. 7) A trial balance of dormant account ledgers should be taken periodically and balanced with the general control account by an employee other than the bookkeeper. 8) Dormant or inactive accounts should be verified directly with depositors. 9) All transactions affecting dormant accounts should be subject to audit by the internal auditor. 10) A semestral report on deposit accounts transferred to dormant should be rendered to bank management. SECTION 1167. Bank Protection . All banks shall observe the rules and regulations embodied in Subsecs. 1167.1 to 1167.7 on bank protection. SUBSECTION 1167.1 Objectives . These regulations are designed to: a. Insure maximum protection of lives and property against bank robberies; b. Prevent bank robberies by making it difficult for or discouraging would-be robbers to carry out their nefarious plans; and c. See to it that, if robberies are indeed committed, bank employees and other witnesses can effectively help law-enforcement authorities in the identification, eventual apprehension and successful prosecution of the perpetrators thereof. SUBSECTION 1167.2 Definitions . For purposes of these regulations, the following definitions are hereby adopted unless the context clearly indicates otherwise: a. "Banking Office" means the main office of a bank or a branch and includes an extension office, sub-office, agency or a money shop. b. "Banking Hours" means the time during which a banking office is open for the normal transaction of business with the public. c. "Teller's Station" or "Window" means a location in a banking office at which bank customers routinely conduct transactions with the bank including a walk-up or drive-in teller's station or window. SUBSECTION 1167.3 Designation of security officer . The board of directors of each bank shall appoint or designate a qualified security officer who shall be under the direct supervision of the president and shall be responsible for the development and administration of a security program and the installation, maintenance and operation of security devices in accordance with the standards prescribed by the Central Bank in separate rules and regulations. The security officer must be at least twenty-five years of age, a college graduate, with at least two years experience in the field of law-enforcement/police matters, of unquestionable integrity and of good moral character. SUBSECTION 1167.4 Security program . The security program of each bank shall be in writing, approved by its board of directors and retained in such form as will readily permit determination of its adequacy and effectiveness and shall contain provisions as may be prescribed by the Central Bank. SUBSECTION 1167.5 Security devices . Within thirty (30) days from the designation of the security officer in the case of a bank with less than ten (10) branches; sixty (60) days in the case of a bank with ten (10) but less than twenty (20) branches; and ninety (90) days in the case of a bank with twenty (20) or more branches, the security officer shall, under the direction of the bank's president, conduct a security survey and submit a report on the needed security devices in each of the bank's banking offices. Banks shall effect the installation, maintenance and operation, as individually appropriate, of the following in each banking office: a. A lighting system for illuminating, during the hours of darkness, the area around the vault, if the vault is visible from outside the banking office; b. Tamper-resistant locks on exterior doors and windows designed to be opened: c. An alarm system or other appropriate device for promptly notifying the nearest law-enforcement officers of an attempted or perpetrated robbery; and d. Such other devices as the security officer shall determine to be appropriate for discouraging robberies and for assisting in the identification and apprehension of persons who commit such acts: Provided : That the security officer shall consider, among other things, the following: 1) The incidence of crimes against the particular banking office and other business establishments in the area in which the banking office is located; 2) The amount of currency or other valuables exposed to robbery; aisadc 3) The distance of the banking office from the nearest law-enforcement officers and the time ordinarily required for such law-enforcement officers to arrive at the banking office; 4) The cost of the security devices; 5) Other existing security measures in effect at the banking office; and 6) The physical characteristics of the banking office structure and its surroundings. Each bank shall install, maintain and operate security devices which are expected to give a general level of bank protection equivalent, at least, to the standards prescribed by the Central Bank in separate rules and regulations. SUBSECTION 1167.6 Reports . As of the last business day of December of every year, each bank shall file with the Department of Commercial and Savings Banks a statement certifying to its compliance with the requirements of Central Bank rules and regulations on bank protection in accordance with the format shown in Appendix 10. SUBSECTION 1167.7 CB inspection . The Governor of the Central Bank shall designate a representative or representatives who shall be knowledgeable in bank protection to personally determine if the security measures, devices or procedures used or adopted by a bank meets the requirements of these regulations and its suppletory regulations, and if based on the report of the representative/s, the bank fails to meet the standards herein set forth, the Governor may direct or require the bank to take necessary corrective actions. SECTIONS 1168-1170 ( Reserved ) J. MISCELLANEOUS PROVISIONS SECTION 1171. Place of Board of Director's Meetings . Domestic banking institutions shall include in their by-laws to be adopted or amended a provision that meetings of their board of directors shall be held only within the Philippines. SECTION 1172. Voting Requirements with Respect to Certain Corporate Transactions . The following farm the regulations on the voting requirements with respect to certain corporate transactions. a. No certificate of authority required under Sections 9 and 10 of Republic Act No. 337, as amended, shall be issued to any bank which has provision in its by-laws requiring the concurrence of one or two directors, not constituting a majority in a quorum, for any decision of the board of directors; or a provision vesting a veto power in the hands of one or two directors, not constituting a majority in a quorum, for any decision of the board. b. Where at least a majority of the equity is reserved by law to be held by Filipino citizens, and foreign stockholders are occupying or will occupy a substantial minority position, no bank will be permitted to provide in its articles of incorporation or by-laws or similar documentation a provision or provisions that certain corporate transactions, would require a voting concurrence of greater than seventy per cent (70%) of the subscribed capital stock entitled to vote. The permissible special transactions which would require a greater than simple majority vote of the decision-making body concerned are as follows: 1) Amendment, repeal or adoption of new by-laws. 2) Issuance of any share of stock of any class, or of any security convertible into or exchangeable for any share of stock, or the grant of an option to purchase any such share or convertible or exchangeable security. 3) Increase or decrease of the number of directors. 4) Incurring or decreasing the bonded indebtedness. 5) Appointment of legal counsel or external auditors. 6) Amendment, repeal or adoption of new by-laws where such power has been duly delegated to the board of directors. 7) Entering into a Management Contract, any contract with third persons, firm or corporation for the general management, administration and operation of the company's business and properties. 8) Amendment, termination (other than by expiration of term), cancellation, extension or modification of the contract referred to in the immediately preceding item. 9) Investing the funds of the bank in the equity of any other corporation or business or for any purpose other than the main purpose for which the bank is organized. 10) Selling, exchanging, leasing or otherwise disposing of all or substantially all of the properties and assets of the bank, including its goodwill, and entering into a merger or consolidation. 11) Issuing stock or bond dividends. 12) Substantial participation of foreigners in the equity of the bank. 13) Increase or decrease of capital stock which would dilute the voting equity of foreign stockholders. 14) Substantial capital expenditures, borrowings and loans. 15) Concentration of credit to affiliated groups of borrowers. 16) Loans to directors, officers, stockholders and/or their related interest. c. The seventy per cent (70%) ceiling on the voting concurrence requirement shall extend to all levels of corporate decisions: (1) stockholders, (2) board of directors, as well as (3) sub-committees of the board, which for this purpose refer to such bodies the voting members of which are composed exclusively of members of the board of directors and whose decisions are binding on the board as a whole without the need for further confirmation. For the board of directors or sub-committees of the board, the seventy per cent (70%) ceiling on the voting concurrence may refer to the entire membership rather than the quorum present. The foregoing policy shall be applied prospectively; hence it shall not affect the articles of incorporation or by-laws of banks where foreign stockholders occupy a substantial minority position already approved by the Central Bank and/or registered with the Securities & Exchange Commission. (As amended by CBP Circular 1177 dated June 24, 1988) SECTION 1173. Articles of Incorporation and By-Laws . Pertinent provisions in the Corporation Code of the Philippines shall apply in so far as they will not run contrary to the pertinent provisions in Republic Act No. 337, as amended. SECTION 1174. Business Name . Only a bank that is granted expanded commercial banking authority may represent itself to the public as such in connection with its business name. SECTION 1175. Management Contracts . The Monetary Board on January 4, 1985 adopted a policy to the effect that; a. Management contracts of banks with management firms shall be limited to consultancy and advisory services; and b. Only a natural person may be elected or appointed as an officer of a bank, without prejudice to such person being a nominee of a management corporation; provided that the responsibility and/or accountability of anyone elected or appointed to an officer position shall be personal in nature and cannot be delegated to a corporation. Existing contracts contrary to this policy should be rescinded or, if rescission is not possible, the same should not be renewed upon their expiration. Any bank entering into such contracts contrary to this policy shall be denied the credit facilities of the Central Bank. ( Effective January 29, 1986 ). SECTIONS 1176-1198 ( Reserved ) SECTION 1199. General Provision on Sanctions . Any violation of the provisions of this Part shall be subject to the provisions of Sections 34 and 34-A of Republic Act No. 265, as amended. casia * Copied verbatim from documents obtained directly from the Bangko Sentral ng Pilipinas PART TWO Deposit and Borrowing Operations A. DEMAND DEPOSITS SECTION 1201. Authority to Accept or Create Demand Deposits . A commercial banking corporation may accept or create demand deposits subject to withdrawal by check. SECTION 1202. Interest on Demand Deposits . No interest shall be paid on demand deposits. SECTION 1203. Reserves Against Demand Deposits . The required reserves against demand deposits shall be twenty three percent (23%) of such deposit liabilities. ( Effective Oct . 3, 1985 ). Note: Amendments of Section 1203 as provided by: 1) Section 1 of CBP Circular 1104 dated May 26, 1986; 2) Section 1 of CBP Circular 1112 dated August 4, 1986; 3) Section 1 of CBP Circular 1209 dated September 1, 1989; 4) Section 1 of CBP Circular 1233 dated March 21, 1990; 5) Section 1 of CBP Circular 1261 dated November 9, 1990; 6) Section 1 of CBP Circular 1269 dated December 26, 1990; 7) Section 1 of CBP Circular 1377 dated January 21, 1993 and; 8) Section 1 of CBP Circular 1395 dated July 5, 1993 SECTION 1204. Temporary Overdrawings; Drawings Against Uncollected Deposits . The following relations shall govern temporary overdrawings and drawings against uncollected deposits. SUBSECTION 1204.1 Prohibition against temporary overdrawings . Temporary overdrawings against current accounts shall not be allowed, unless caused by normal bank charges and other fees incidental to handling such accounts, which in no case shall exceed Two Hundred Pesos (P200.00). Banks which violate these regulations shall be subject to a fine of one tenth of one per cent per day of violation, computed on the basis of the amount of overdrawing. Technical overdrawings arising out of "force posting" in-clearing checks shall be debited by banks under "Returned Checks and other Cash Items Not in Process of Collection" which is part of "Other Assets" in the Statement of Condition. Items to be lodged under this account shall consist only of in-clearing checks which may result in "technically overdrawn" accounts and shall be immediately reversed the following day. The checks lodged under "Returned checks, etc." shall either be returned or honored the following day before Central Bank clearing. The items to be used as cover for the honored checks should only consist of any of the following: a. Cash b. Cashier's, Manager's or Certified Checks c. Bank Drafts d. Postal Money Orders e. Treasury Warrants f. Duly funded "On Us" Checks g. Fund transfers/credit memos within the same bank representing proceeds of loans granted under existing regulations. Peso demand deposit accounts maintained by foreign correspondent banks with commercial banks shall not be subject to the abovementioned regulations: Provided , That: a. The maintenance of non-resident correspondent bank's peso checking accounts and overdrawings therefrom are covered by reciprocal arrangements; b. The temporary overdrawings are covered within fifteen (15) days from the date the overdrawings are incurred; and c. Such accounts are credited only through foreign exchange inward remittances. SUBSECTION 1204.2 Drawings against uncollected deposits (DAUDs) . As a matter of policy, DAUDs shall be prohibited except when the drawings are made against uncollected deposits representing manager's/cashier's/treasurer's checks, treasury warrants, postal money orders and duly "on us" checks which may be permitted at the discretion of each bank. SECTION 1205. Checks Without Sufficient Funds . To complement the provisions of Batas Pambansa Blg. 22, an Act penalizing the making or drawing and issuance of a check without sufficient funds or credit, the following regulations shall govern. a. The drawee bank shall stamp, write or print on a dishonored check or on a paper attached thereto the date the check is presented for payment and the reason for the refusal to pay the same to the holder thereof. b. Where the reason for the dishonor of a check is stamped, written or printed on a paper attached to the check, the drawee bank shall indicate the pertinent details, such as the names of the drawer, the payee and the drawee bank, the date and amount of the check, the check number and the date of dishonor. c. The drawee bank shall use only the remark or notation "Drawn Against Insufficient Funds", "No Sufficient Funds" or "Insufficient Funds" stamped, written, or printed on, or attached to the check dishonored or returned by reason of insufficiency of funds or credit. d. notwithstanding receipt of an order to stop payment, the drawee bank shall likewise stamp, write, or print on, or attach to the check any of the remarks or notations mentioned in Item "c" hereof indicating that there were no sufficient funds in or credit with such bank for the payment in full of such check, if such be the fact. The bank shall also indicate receipt of a stop payment order. e. For local exchanges, a check dishonored by reason of insufficiency of funds or credit shall be returned by the drawee bank to the negotiating bank not later than the next regular clearing. For out-of-town exchanges, a check so dishonored shall be returned by the drawee bank to the negotiating bank within the period specified announcing the opening of clearing facilities in each of the authorized regional clearing centers. A check dishonored by reason of insufficiency of funds or credit which was not coursed through the Central Bank clearing system shall be returned by the drawee bank to the holder or the negotiating bank, as the case may be, not later than the business day following the date the check is presented for payment with the drawee bank. The negotiating bank shall, in turn, return a check dishonored by reason of insufficiency of funds or credit to the holder not later than the business day following its receipt of the dishonored check from the drawee bank. f. This section shall not be deemed or construed to modify or amend the provisions of the Negotiable Instruments Law. For purposes of compliance with Item "b" of this section, the details on the check number, the date of the dishonor of the check and the reason for such dishonor shall be considered sufficient compliance with the provisions of said item. SECTION 1206. Current Accounts of Bank Officers and Employees . The following officers and employees of commercial banks are prohibited from maintaining demand deposits or current accounts with the banking office, such as the head office or branch, in which they are assigned: a. Officers and employees of the cash department; b. Officers of banking offices other than head offices, such as branches, extension offices and money shops; and c. Other officers and employees who have direct and immediate responsibility in the handling of transactions and/or records pertaining to demand deposits or current accounts. The abovementioned prohibition shall include the spouses and minor children under the parental authority of the officers and employees covered by the prohibition, and the business interests of such officers and employees, their spouses and minor children under their parental authority, in single proprietorships, or partnerships or corporations in which such officers and employees, individually or as a group, own or control at least a majority of the capital of the partnership or the outstanding subscribed capital stock (voting and non-voting) of the corporation. Officers and employees of commercial banks who do not have direct and immediate responsibility in the handling of transactions and/or records pertaining to demand deposit or current accounts, including their spouses and minor; children under their parental authority, and the business interests of such officers and employees, their spouses and minor children under their parental authority, in single proprietorships or partnerships or corporations in which such officers and employees, individually or as a group, own or control at least a majority of the capital of the partnership or the outstanding subscribed capital stock (voting and non-voting) of the corporation, may maintain such deposits or accounts in any office of the banking institution where they are employed as such, including the offices in which they are assigned; officers and employees who are so responsible and those mentioned in the second paragraph of this section may maintain such deposits or accounts only in offices in which the officers and employees are not assigned. SECTION 1207-1211 ( Reserved ) B. SAVINGS DEPOSITS SECTION 1212. ( Reserved ) SECTION 1213. Interest on Savings Deposits . Savings deposits shall not be subject to any interest ceiling. SECTION 1214. Reserves Against Savings Deposits . The required reserves against savings deposits shall be twenty three percent (23%) of such deposit liabilities. ( Effective Oct . 3, 1985 ). Note: Amendments of Section 1214 as provided by: 1) Section 1 of CBP Circular 1104 dated May 26, 1986; 2) Section 1 of CBP Circular 1112 dated August 4, 1986; 3) Section 1 of CBP Circular 1209 dated September 1, 1989; 4) Section 1 of CBP Circular 1233 dated March 21, 1990; 5) Section 1 of CBP Circular 1261 dated November 9, 1990; 6) Section 1 of CBP Circular 1269 dated December 26, 1990; 7) Section 1 of CBP Circular 1377 dated January 21, 1993 and; 8) Section 1 of CBP Circular 1395 dated July 5, 1993 SECTION 1215. Servicing Deposits Outside Bank Premises . As a general policy, all banks may be authorized to solicit and accept deposits outside their bank premises, subject to the following conditions: a. The proposed area where applicant bank intends to solicit should be clearly defined; b. Solicitation of deposits should only be confined within a locality where there are no other banks in operation, except applicant bank, or where it can be clearly established that the deposit potentials of the said locality are still untapped; cdlex c. Applicant bank shall institute and maintain the following minimum safeguards: (1) All deposit solicitors shall be initially bonded for at least P1,000.00, subject to the increase thereof to approximate their daily collections. (2) Deposit solicitors shall be provided with proper identification cards with photograph and signature of each respective solicitor, certified to by the appropriate officer of the bank. Said identification cards shall be worn by each solicitor at all times at the upper left breast of his outer garment when soliciting deposits; (3) Adequate insurance coverage for funds in transit (representing deposits collected outside banking premises) should be secured by applicant bank from insurance companies not included in the list of companies blacklisted by the Insurance Commissioner; (4) Deposit slips, different from that issued by tellers in the counter, shall be in booklet form, pre-numbered, in triplicate copies and in three colors the original to be issued to the depositor, the second copy to be used for posting reference, and the third copy to be retained in the booklet; (5) All collections shall be turned over to the cashier at the end of each day accompanied by a "Collection Summary Report" to be accomplished in duplicate which shall contain the following minimum in information: (a) Date of report (b) Names addresses of the depositors (c) Deposit slip numbers (d) Amounts of deposit (e) Savings account and passbook numbers (f) Name and signature of solicitor rendering the report. (6) Depositors shall always be required to accomplish "Signature Cards" when opening an account, which card shall be used always as reference in checking the genuineness/authenticity of signature affixed on withdrawal slips or authorizations for withdrawals; (7) Deposits/withdrawals shall be recorded by the bookkeeper or any ledger clerk, except any bank solicitor, in the depositor's ledger cards and passbooks on the same day that such deposits/withdrawals are accepted/approved by the bank. Passbooks shall be returned to the depositors not later than the following business day; (8) At the end of each month, depositors shall be advised in writing of the balances of their deposits the bank, the advise slips of which shall never be hand-carried by the solicitors themselves; and (9) Places of assignments of bank solicitors shall be rotated at least quarterly. d. The appropriate supervising department shall certify that the financial condition of the bank applying; for authority to solicit and collect savings deposits outside its bank premises is sound and that the operations and the quality of the management thereof could reasonably assure the safety of the funds which may be entrusted to its deposit collectors and/or solicitors. SUBSECTION 1215.1 Solicitation of deposits under the TIPID Movement . The revised TIPID Movement Manual as embodied in Appendix 11 shall be used as the official procedural guideline in the implementation of the TIPID Movement by all participating banks. a. Segregation of TIPID Accounts . To effectively monitor the growth in savings and time deposits under the TIPID Movement the school savings project of the National Commission on Savings banks are hereby required to identify and segregate TIPID accounts from other accounts. TIPID accounts shall refer to savings and time deposit accounts of elementary and high school students. Accounts of schoolchildren held in trust or opened by parents or guardians, however, shall be treated as regular deposit accounts. To facilitate identification of TIPID accounts, banks shall require new depositors to indicate on the signature card, among other information, the date of birth, whether or not a student; and grade level if a student. To avoid including in the TIPID accounts the savings and time deposits of high school graduates, age eighteen (18) years shall be presumed the age at which students finish high school. Savings or time deposit accounts, therefore, of students who are 18 years old and above shall not be considered as TIPID accounts, but treated as regular deposit accounts. In the case of old accounts, banks shall exert efforts to identify and segregate TIPID accounts from regular deposit accounts until all TIPID accounts shall have been brought up-to-date. Banks shall submit their report on TIPID accounts to the Central Bank supervising department concerned in the pertinent page/attachment of the appropriate reports forms (CBP 7-16-02 KB.2, Page 7 for commercial banks). In the report, banks should ensure that the totals of the number and amount tally (a) under Savings Deposits as to size and source; and (b) under Time Certificates of Deposits as to size, source and maturity. SUBSECTION 1215.2 Solicitation of deposits under, the Barangay Savings Movement . Banks in the provinces of Batangas, Negros Occidental and other provinces where the Barangay Savings Movement may henceforth be implemented may be authorized, on a case-to-case basis, to solicit deposits in designated places outside their premises on certain specific days, subject to the following rules and regulations: a. The solicitor shall be a regular employee of the depository bank; b. Solicitation will be allowed only in those areas or localities where the distance between the bank and barangay makes it difficult or otherwise impractical for a depositor too deal directly with the bank; c. Banks shall make prior arrangements with barangay officials as to the dates, place, and time of solicitation and shall post notice thereof conspicuously in the agreed place of solicitation; d. The solicitor shall be initially bonded or at least P1,000.00, subject to increase to approximate the average daily collections; e. The solicitor shall be provided with an identification card with his photograph and signature, certified to by an officer of the bank. This identification card shall be worn by the solicitor at all times at the upper left breast of his outer garment when soliciting deposits; f. Adequate insurance coverage for funds transit representing deposits collected outside banking premises shall be secured by the bank concerned from insurance companies be included in the list of companies blacked by the Insurance Commissioner; Deposit slips, different from that issued by counter tellers, shall be pre-numbered in booklet form, in triplicate and in three colors the original to be used for posting reference, the second copy to be issued to the depositor, and the third copy to be retained in the booklet; All collections shall be turned over to the Cashier at the end of each day, accompanied by a "Collection Summary Report" to be accomplished in duplicate which shall contain the following minimum information: type of the report; names and addresses of the depositors deposit slip numbers; amounts of deposits; savings account and passbook numbers; and the name and signature of the solicitor rendering the report; i. The depositor shall be required to accomplish a "Signature Card" when opening an account. The card shall be used as reference in checking the genuineness or authenticity of the signature affixed on withdrawal slips or authorizations for withdrawals; j. With proper safeguards, withdrawals may also be effected through the bank solicitor; k. Deposits and withdrawals shall be recorded by the bookkeeper in the depositor's ledger cards and passbooks on the same day that such deposits or withdrawals are accepted or approved by the bank. Passbook shall be returned to the depositors not later than the next scheduled solicitation day; and l. No bank shall avail of this solicitation facility unless previously authorized by the Central Bank. For purposes of this subsection, banks concerned may submit their request for authority to solicit deposits to the pertinent supervising department in the Central Bank. SECTION 1216. Withdrawals . Banks are prohibited from issuing/accepting "withdrawal authority slips" or any other similar instruments designed to effect withdrawals of savings deposits without following the usual practice of requiring the depositors concerned to present their passbooks and accomplishing the necessary withdrawal slips. Withdrawals from savings deposits are covered by the DAUD prohibition mentioned in Subsec. 1204.2. SECTION 1217. Dormant Savings Accounts . Banks may impose service or maintenance fees on dormant or inactive savings accounts. However, the rate of service charges or maintenance fees, the prescribed period of dormancy and the minimum balance of deposits before such charges or fees may be imposed, shall be properly disclosed among the terms set forth in the passbook of every depositor. ( Effective June 27, 1985 ). SECTION 1218. Savings Deposits of Farmer-Borrowers . Authority shall be automatically granted to any accredited banking institution which may participate in the supervised credit program to accept special from farmer-borrowers, subject to the following conditions: a. Only the balance of loans granted under the supervised credit program shall be deposited in the special savings deposits of farmer-borrowers, as an exception to the provisions of Sec. 1302.1; b. Withdrawals against such special savings deposit accounts shall be allowed only (1) in amounts specified in the approved farm plan and budget, and (2) upon certification by the technician either of the Central Bank and/or banking institution that previous releases were used in accordance with the farm plan; c. The special savings deposit shall earn interest at the same rate that the banking institution charges the borrower for such loans, as an exemption to interest rate regulations on deposits; and d. The special savings deposit shall be exempt from the legal reserve requirement, as an exception to the existing policies on the matter. SECTION 1219. Rental Deposits of Lessees . The following guidelines shall govern the opening and handling by banking institutions of deposits made by lessees pursuant to Section 5(b) of Batas Pambansa Blg. 25, otherwise known as the; Rental Control Law: a. The deposit made by the lessee shall only be accepted by the bank under a special savings account in the name of the lessor; b. The bank shall require the lessee to submit a copy of the written notice sent to the lessor for the deposit made, stating, among others, the date and amount of the deposit and the name and address of the lessor; c. The bank, at its option, may require the lessee to submit any supporting document, such as the lease contract or official receipt of previous rentals paid, which will show the specimen signatures of the lessor, or other papers to identify the lessor; d. The bank shall segregate from its regular savings deposit accounts, and maintain a separate subsidiary control ledger for, deposits made under Section 5(b) of Batas Pambansa Blg. 25; LibLex e. Any withdrawal against these special savings deposit accounts may only be allowed in favor of the lessee concerned before the amount deposited under consignation has been accepted by the lessor, or when authorized by the lessor; f. The expenses which may be incurred by the bank with respect to such rental deposits shall be charged against the lessor; g. All the minimum internal control standards applicable to savings deposit accounts prescribed in Sec. 1166 shall be complied with; and h. The acceptance of such rental deposits, however, shall be optional or discretionary only upon the bank concerned. SECTIONS 1220-1222 ( Reserved ) C. NOW ACCOUNTS SECTION 1223. Authority to Accept NOW Accounts . A commercial banking corporation may offer NOW (Negotiable Orders of Withdrawal) accounts. SECTION 1224. Interest on NOW Accounts . NOW accounts shall not be subject to any interest rate ceiling. SECTION 1225. Reserves Against NOW Accounts . The required reserves against NOW accounts shall be twenty three percent (23%) of such deposit liabilities. ( Effective Oct . 3, 1985 ). Note: Amendments of Section 1225 as provided by: 1) Section 1 of CBP Circular 1104 dated May 26, 1986; 2) Section 1 of CBP Circular 1112 dated August 4, 1986; 3) Section 1 of CBP Circular 1209 dated September 1, 1989; 4) Section 1 of CBP Circular 1233 dated March 21, 1990; 5) Section 1 of CBP Circular 1261 dated November 9, 1990; 6) Section 1 of CBP Circular 1269 dated December 26, 1990; 7) Section of 1 CBP Circular 1377 dated January 21, 1993 and; 8) Section 1 of CBP Circular 1395 dated July 5, 1993 SECTIONS 1226-1229 ( Reserved ) D. TIME DEPOSITS SECTION 1230. ( Reserved ) SECTION 1231. Interest on Time Deposits . Time deposits shall not be subject to any interest rate ceiling. SECTION 1232. Reserves Against Time Deposits . The required reserves against time deposits maturities of 730 days or less shall be twenty three percent (23%) of such deposit liabilities. Effective April 25, 1984, the required reserves against time deposits with original maturities of more than 730 days shall be six percent (6%). ( Effective Oct . 3, 1985 ). Note: Amendments of Section 1232 as provided by: 1) Section 1 of CBP Circular 1112 dated August 4, 1986; 2) Section 1 of CBP Circular 1122 dated November 28, 1986; 3) Section 1 of CBP Circular 1204 dated June 23, 1989; 4) Section 1 of CBP Circular 1207 dated August 4, 1989; 5) Sections 1 and 2 of CBP Circular 1209 dated September 1, 1989; 6) Sections 1 and 2 of CBP Circular 1233 dated March 21, 1990; 7) Section 1 of CBP Circular 1261 dated November 9, 1990; 8) Section 1 of CBP Circular 1269 dated December 26, 1990; 9) Section 1 of CBP Circular 1377 dated January 21, 1993 and; 10) Section 1 of CBP Circular 1395 dated July 5, 1993 SECTION 1233. Minimum Size and Term of Time Deposits . Banks shall not require a minimum amount of time deposit greater than P1,000.00. No the deposit shall be accepted for a term of less than thirty (30) days. SECTION 1234. Special Time Deposits . Authority shall be automatically granted to any accredited banking institution which may participate in the supervised credit program to accept special time deposits from the Agrarian Reform Commission (ARFC) with interest lower than the rate allotted on time deposits accepted from the general public. Such deposits shall be exempt from the legal reserve requirements, as an exception to the existing policies on the matter. SECTION 1235. Negotiable Certificates of Time Deposit . The issuance of negotiable certificates of time deposits shall be governed by the following rules: SUBSECTION 1235.1 Minimum features a. Form : denomination Negotiable certificates of time deposits may be issued in bearer or other form denoting negotiability and shall have a standard format to be prescribed by the Central Bank which shall be prenumbered serially, predenominated and printed on security paper by the Security Printing Plant of the Central Bank. The minimum denomination shall be at the discretion of the issuing bank. No certificate payable to bearer shall contain words prohibiting its negotiation. ( Effective Nov . 9, 1983 ). b. Term The minimum maturity of the certificates shall be 731 days. c. Manner of issuance The certificates shall be issued only upon receipt of funds equivalent to their face value. d. Manner of Printing Negotiable Certificates of Deposits which shall be printed on security paper by the Security Printing Plant (SPP) of the Central Bank. Orders for the printing of the desired forms shall not exceed a total value equivalent to 20% of the issuing bank's capital accounts (based on the quarter immediately preceding the request for printing) at any one time. Additional orders for printing which shall result in an excess over the prescribed benchmark shall require prior Central Bank approval. SUBSECTION 1235.2 Insurance coverage The negotiable certificates of time deposit shall be insured with the Philippine Deposit Insurance Corporation (PDIC), subject to applicable rules and regulations, among others, on maximum insurance coverage, and on the requirement that banks issuing bearer certificates shall have imprinted on the instrument the following: For purposes of deposit insurance by the Philippine Deposit Insurance Corporation, the holder shall have his name registered in the books of the issuing bank. SUBSECTION 1235.3 Other requirements Negotiable certificates of time deposit shall be subject to applicable rules and regulations governing regular time deposits, including the twenty per cent 20% final withholding tax, and the rules of pretermination. (Effective April 18, 1983) SUBSECTION 1235.4 Negotiable certificates of time deposits of foreign branches of domestic banks . Foreign branches of domestic banks are hereby required to obtained Central Bank approval thru the Management of External Debt and Investment Accounts Department (MEDIAD) for the flotation of negotiable instruments such as certificates of deposit. ( Effective June 3, 1983 ) SECTION 1236. Reserve requirements . A five per cent (5%) reserve shall be maintained against all issues of negotiable certificates of time deposit including any outstanding amount as of date of Circular. ( Effective April 18, 1983 ). Note : Amendments of Section 1236 as provided by the following CBP Circulars: 1) Section 1 of CBP Circular 1261 dated November 9, 1990; 2) Section 1 of CBP Circular 1269 dated December 26, 1990; 3) Section 1 of CBP Circular 1377 dated January 21, 1993 and; 4) Section 1 of CBP Circular 1395 dated July 5, 1993 SECTIONS 1237-1238. ( Reserved ) E. GOVERNMENT DEPOSITS SECTION 1239. Authority to Service Government Deposits . Except as may be authorized by existing statutes, no private bank shall, without prior approval of the Monetary Board, accept, as depository any fund or money from the Government, its branches, agencies sub-divisions, instrumentalities, including government-owned or controlled corporations, hereinafter referred to as "Government and government entities"; nor shall a private bank or non-bank financial intermediary, whether or not performing quasi-banking functions, borrow any fund or money from the Government and government entities, through the issuance or sale of its acceptances, notes or other evidences of dept. ( Effective September 12, 1983 .) SUBSECTION 1239.1 Banks which may accept government funds . The Philippine National Bank (PNB), the Development Bank of the Philippines (DBP), the Land Bank of the Philippines (LBP), the Philippine Amanah Bank (PAB) and any private bank duly authorized by the Monetary Board as required under Sec. 1239 in cities or municipalities where there are no existing branches, agencies or extension offices of the above-named government-owned banks, may accept demand, savings or time deposits from the government and government entities: Provided, however , That only minimum working balances to meet monthly payroll requirement, project outlays, or office operational needs of the Government or government entity may be held by authorized private banks: Provided, further , That for purposes of this subsection, the Philippine Veterans Bank (PVB), a private bank which by its charter is a depository of government funds, need not secure prior approval of the Monetary Board to accept deposits of, and borrowings from the Government and government entities. Banks may not receive or hold as trustee, agent, administrator, financial manager, or other similar capacity any fund or money from the Government and government entities ( Effective September 12, 1983 ). All existing placements of government funds held by banks as trustee, agent, administrator, financial manager or other similar capacity shall be terminated within one year from the date of this Circular ( Effective September 12, 1983 ). aisadc SUBSECTION 1239.2 Definitions of terms . For purposes of Sec. 1239 and Subsecs 1239.1 to 1239.6 the following terms shall have the meaning indicated unless the context clearly indicates otherwise: a. The term "government-owned or controlled corporations" shall refer to government-owned or controlled corporations which are created by special laws. It shall exclude government financial institutions such as the PNB, DBP, LBP and PAB, corporations which * respect to the following deposits and/or borrowings: a. Deposits of, and/or borrowings from PNB, DBP, LBP and PAB; b. Deposits of the National Food Authority (NFA) with banks and incident to the credit lines extended by them to NFA in connection with the financing of its rice program; c. Marginal deposits on importations; d. Proceeds of DBP bonds sold by DBP-accredited sales and service agencies for the bond marketing operations of DBP; e. Funds received by private development banks as collecting agents of DBP; f. Collections representing premium contributions to the Social Security System: Provided , That funds thus collected shall be remitted to the System within thirty (30) days from receipt thereof: Provided, further , That such premium contributions shall not earn interest while in the custody of the banks nor shall any service charge be collected thereon; g. National internal revenue taxes, customs and tariff duties and export-premium duties collected by authorized agent banks; h. Deposits and/or borrowings from the Central Bank for purposes of relending in connection with CB-administered funds; i. Proceeds of rediscounting, repurchase agreements and other credit facilities with the Central Bank; and j. Any other form of deposits and/or borrowings specifically authorized by law or exempted by the Monetary Board. SUBSECTION 1239.5 Application for authority . Private banks may file an application for authority to accept deposits from the Government and government entities and/or to receive or hold any fund or money thereof as trustee, agent, administrator, or similar capacity with the appropriate supervising and examining department of the Central Bank. The application shall state, among other particulars, the Government office or entity concerned, its location, the type of deposits to be accepted or the capacity in which the said funds are to be received by the bank concerned, and the amount thereof. The letter of authority shall fix the terms and conditions for the acceptance of such government deposits and/or the performance of its functions as trustee, agent, administrator, or other capacity by the banks. The letter of authority for a private bank to accept deposits only from the Government or government entity, may be issued by the Governor. SUBSECTION 1239.6 Sanctions . Any violation of Sec. 1239 and Subsecs. 1239.1 to 1239.5 shall be a ground for the imposition of the following sanctions: a. The deposit account with the Central Bank of the bank concerned shall be debited by the Accounting Department of the Central Bank in the amount of the unauthorized deposit or borrowing upon receipt of a report or notice from the appropriate supervising and examining department of the Central Bank, and the deposit account of the PNB with the Central Bank shall be credited for the same amount. A copy of said report or notice of the supervising and examining department shall be furnished each to the bank concerned and the PNB; b. Any bank with deficiency in the required liquidity floor against deposits of, and/or borrowings from, the Government and government entities or with excess holdings of such deposits shall (1) be denied the credit facilities of the Central Bank; and (2) if the deficiency lasts for four (4) consecutive weeks, the bank shall be prohibited from declaring cash dividends and making new loans and investments, except investments in government securities. The prohibition shall be lifted by the Governor or the Senior Deputy Governor upon certification by the appropriate supervising and examining department that the bank has had no deficiency in its liquidity floor and no excess holdings of government deposits for at least four (4) consecutive weeks; c. In the case of non-bank financial intermediaries, the authority to engage in quasi-banking functions by the entity concerned may be suspended for such period of time as may be determined by the Monetary Board, which shall in no case be less than thirty (30) calendar days from receipt of the advice to this effect; and d. The withdrawal of previously granted authority to accept government funds. SECTIONS 1240-1241. ( Reserved ) F. INTEREST ON DEPOSIT LIABILITIES SECTION 1242. Interest on Demand Deposits . No interest shall be paid on demand deposits. SECTION 1243. Interest on Savings Deposits and NOW Accounts . Savings deposits, including NOW accounts, shall not be subject to any interest rate ceiling. SECTION 1244. Interest on Time Deposits . Time deposits shall not be subject to any interest rate ceiling. SUBSECTION 1244.1 Time of payment . Interest on time deposits may be paid at maturity or upon withdrawal or in advance: Provided, however , That interest paid in advance shall not exceed the interest for one (1) year. SUBSECTION 1244.2 Treatment of matured time deposits . A time deposit not withdrawn or renewed on its due date shall be treated as a savings deposit and shall earn an interest from maturity to the date of actual withdrawal or renewal at a rate applicable to savings deposits. SUBSECTION 1244.3 Pretermination . The interest of a time deposit terminated before the maturity date fixed in the certificate of time deposit shall be as follows: a. Any time deposit terminated within the first half of its maturity period shall be paid an interest rate equivalent to twenty-five per cent (25%) of the interest stipulated in the contract; b. Any time deposit terminated within the second half of its maturity period shall be paid an interest rate equivalent to fifty per cent (50%) of the interest stipulated in the contract; c. The provisions of this rule shall not apply in the case of time deposits with maturities of more than 730 days which are preterminated more than 730 days which are pre-terminated more than 730 days after the date of deposit: Provided , That if interest has been pain in advance, the corresponding rebate shall be charged against the principal of the time deposit. SECTION 1245. (Deleted by Circular 889) SECTION 1246. (Reserved) SECTION 1247. Employees' Provident Fund Contributions . Provident fund contributions of and for the benefit of bank employees and deposited in their own banks are exempted from the provisions of regulations on interest rates on deposits. SECTION 1248. Disclosure of Effective Rates of Interest . Banks are required to disclose to depositors the following information on interest computation and payments: a. Type/kind of deposit; b. Nominal rate of interest and period covered; c. Manners of interest payment, i.e., whether credited in advance or otherwise; d. Basis of interest payment, i.e., whether based on average daily balance compounded quarterly or otherwise; e. Effective rate of interest expressed as a simple annual rate, on the basis of the information above given and indicating the formula used to arrive at the effective rate of interest; and f. Illustration of basis of computing interest on a hypothetical deposit account Copies of the above-mentioned information shall be made available to each and every depositor by attaching these copies to savings deposit passbooks and to time deposit certificates. Posters disclosing the above information shall also be displayed conspicuously within the bank premises. Banks are also required to disclose to depositors upon request, the effective interest rates on their deposits. Non-compliance with this section shall subject the banking institution concerned to such administrative sanctions as the Monetary Board shall impose. SECTIONS 1249-1252. ( Reserved ) G. RESERVES AGAINST DEPOSIT LIABILITIES SECTION 1253. Accounts Subject to Reserves ; Amount Required . The required reserves against deposit liabilities in local currency of banks shall be as follows: a. Banks with expanded commercial banking authority, commercial banks, the Land Bank of the Philippines and the Philippine Amanah Bank Against demand and savings deposits and NOW accounts, twenty three per cent (23%) of such type of deposit liability. Against time deposits: With original maturities of 730 days or less, twenty three per cent (23%) of such deposit liabilities. With original maturities of more than 730 days, six per cent (6%) of such deposit liabilities, regardless of remaining maturities. ( Effective Oct . 3, 1985 ). b. Development Bank of the Philippines Against savings deposits, fourteen (14%) per cent of such savings liabilities. Against time deposits: With original maturities of 730 days or less, fourteen (14%) per cent of such deposit liabilities. With original maturities of more than 730 days, six per cent (6%) of such deposit liabilities, regardless of remaining maturities, (Effective April 25, 1984). Note : Amendments of Section 1253 as provided by the following CBP Circulars: 1) Section 1 CBP Circular 1079 dated October 3, 1985; 2) Section 1 of CBP Circular 1104 dated May 26, 1986; 3) Section 1 of CBP Circular 1112 dated August 4, 1986; 4) Section 1 of CBP Circular 1122 dated November 28, 1986; 5) Section 1 of CBP Circular 1204 dated June 23, 1989; 6) Section 1 of CBP Circular 1207 dated August 4, 1989; 7) Sections 1 and 2 of CBP Circular 1209 dated September 1, 1989; 8) Sections 1 and 2 of CBP Circular 1233 dated March 21, 1990; 9) Section 1 of CBP Circular 1261 dated November 9, 1990; 10) Section 1 of CBP Circular 1269 dated December 26, 1990; 11) Section 1 of CBP Circular 1377 dated January 21, 1993 and; 12) Section 1 of CBP Circular 1395 dated July 5, 1993 SECTION 1254. Form or Composition of Reserves . The form in which required reserves against deposit liabilities in local currency will be held shall be as follows: LLphil 'a. Deposits with the Central Bank Minimum Required As Per Cent of Required Reserves Banks with expanded commercial banking authority, commercial banks, the Land Bank of the 25%" Philippines, the Philippine Amanah Bank and the Development Bank of the Philippines Provided, however , that foreign exchange holdings of the above banks shall be eligible as part of reserves against these deposit liabilities in an amount not to exceed fifty percent (50%) of above-mentioned twenty-five per cent (25%), without need of being deposited the Central Bank; provided, further , that the equivalent amount in pesos of such foreign exchange assets used as reserves shall be invested in special Central Bank instruments. ( Effective February 18, 1985) . Effective January 1, 1982, the form of reserves against peso deposit liabilities on deposit with the Central Bank of the Development Bank of the Philippines shall be thirteen percent (13%) of the required reserves and shall be increased at the rate of four percentage points every semester thereafter until the minimum requirements shall have been reached. In areas were the Central Bank has no regional offices, deposit balances of the required reserves of banks with the Central Bank shall be deposited with branches of the Philippine National Bank authorized to accept such deposits in trust for the Central Bank. (As deleted by CBP Circular 1131 dated January 30, 1987) b. Government Securities and Cash in Vault . The remaining portion of the required reserves may be held by all banks in the form of cash in vault and/or government securities or evidences of indebtedness of the Republic of the Philippines. For purposes of this section, government securities which may form part of the reserves against deposit substitute liabilities of banks shall refer to bonds or other evidences of indebtedness representing direct obligations of the Government of the Republic of the Philippines: Provided , That such securities shall have the following minimum features/conditions: (1) The securities must bear an interest rate of not more than four per cent (4%) per annum, must be non-negotiable, and shall carry Central Bank support; and (2) The amount, maturity date and rate of interest must be definite and stated in the certificate itself. Premyo Savings Bonds (Regular and Biglang Bahay Series) shall continue to be eligible as reserves of banks against deposit liabilities in accordance with the following schedule: Per Cent of Reserve Required Requirement Ceiling on Government Securities July 1, 1983 June 30, 1984 37.5 50 July 1, 1984 June 30, 1986 18.75 25 Effective July 1, 1986, said bonds shall no longer be eligible as reserves. (Effective Jan. 13, 1984) Other government securities being used for reserve purposes shall continue to be eligible as such: Provided , That whenever said securities shall have matured, they shall be replaced by securities carrying the above features. Only the buying/lending bank in a resale agreement covering eligible government securities may use such securities as reserves against deposits. Conversely, the selling/borrowing bank in a repurchase agreement covering eligible government securities may not use such securities as reserve against deposits. Securities held as reserves shall be valued at cost of acquisition and the bank may keep physical possession of such securities. It may freely alter its composition: Provided , that any substitution satisfies the eligibility requirements prescribed in Item "b" of this section: Provided, further , That the bank notifies the Central Bank of any such change in the prescribed forms not later than the reporting day following the change as provided in Sec. 1257. Securities counted as reserves may not be hypothecated or encumbered in any way or earmarked for any other purpose without automatically losing their eligibility as reserves. The list of reserve Eligible and non-eligible securities may be found in Appendix 42. SUBSECTION 1254.1 Allowable drawings against reserves . In connection with the bank reserves on deposit with the Central Bank to comply with legal requirements, all banks are reminded that said deposits are not regular current accounts. The use, therefore, of Central Bank checks for drawings against reserve deposits shall be limited to (a) settlement of obligations with the Central Bank; and (b) withdrawals to meet cash requirements. SUBSECTION 1254.2 Exclusion of uncleared checks and other cash items . Checks and other cash items which have not been cleared yet through the Clearing Office should not be debited to the account "Due from the Central Bank of the Philippines" and should not be considered as available reserves against deposit liabilities. Such items shall invariably be debited to the "Checks and Other Cash Items" account. Only after the checks and other cash items have been cleared through the Clearing Office can the bank debit the "Due from the Central Bank of the Philippines" account for said items. SUBSECTION 1254.3 Interest income on reserve deposit with CB . Deposits maintained by banks with the Central Bank as part of their reserve requirement shall be paid interest at four per cent (4%) per annum based on the average daily balance of said deposits to be credited quarterly. ( Effective June 1, 1984 ) SUBSECTION 1254.4 Book entry method for reserve securities . All purchases of Treasury Bonds, Treasury Notes and PW & ED Bonds for legal reserve purposes shall already be serviced under the book-entry procedure. All transactions on book-entry securities shall be entered in the bank's/non-bank's securities accounts and evidenced by debit and/or credit advices. No physical certificates shall be issued for any purpose, and transactions between banks/non-banks on book-entry securities shall not be recognized. Interest and redemption payments on book-entry securities shall be made by the Securities Servicing Department of the Central Bank on interest payment dates and at maturity through automatic credit to the bank's/non-bank's demand deposit account with the Central Bank. ( Effective May 30, 1983 ). Documentation of outright sales transactions with the Central Bank on such securities shall be in accordance with the following procedures: 1. Banks and NBQBs shall accomplish the Confirmation of Sale in the prescribed form quadruplicate and signed by two (2) authorized signatories of the institution. 2. The accomplished COS form shall be forwarded to the Securities Servicing Department not later than 2:30 p.m. of value date for certification. An SSD authorized officer shall certify to the existence of the securities in the Securities Account of the bank/NBQB concerned by appending his signature on all copies. 3. The bank or NBQB shall submit the original document not later than 3:00 p.m. of the same day to the Central Bank Treasury, as basis for payment of the proceeds either by credit advise or by check. The CB Treasury shall not pay the seller without the verified complete documents. ( Effective June 10, 1983 ). SECTION 1255. Computation of Reserve Position . At the close of each banking day except Saturday, Sunday or public holiday, and when there is no Central Bank clearing, each bank shall compute its reserve position on the basis of the amount of its reserves and its deposit/deposit substitute liabilities against which said reserves are required to be maintained. For this purpose, the principal office in the Philippines and all branches and agencies located therein shall be treated as a single unit. Included among deposits (demand, savings and time) subject to reserve requirements are (a) proceeds from sales of DBP Progress Bonds; and (b) collection of premium contributions from the Social Security System which shall be treated as demand deposits. Exempt from reserve requirements are: (a) all collections credited to the Special Account "Due to Central Bank Internal Revenue Account (Other Cities and Municipalities)"; (b) special time deposits from the Agrarian Reform Fund Commission and special savings deposits from farmer-borrowers; (c) unclaimed balances of deposit liabilities already reported to the Treasurer of the Philippines in accordance with the Unclaimed Balances Act (Act No. 3936, as amended by Presidential Decree No. 679) and transferred/reclassified from the deposit liability/other credit accounts to the liability account "Due to the Treasurer of the Philippines." Local banks may deduct from the amount of their "gross demand deposits" the balances of demand deposits lodged in "due from other local banks" which are subject to immediate withdrawal. As used herein, the term "gross demand deposits" shall mean the sum of all individual deposits, including deposits made by other local banks, the Philippine Government, its political subdivisions and instrumentalities, and government-owned or controlled corporations. (As amended by CBP Circular 1132 dated February 3, 1987) SECTION 1256. Reserve Deficiencies ; Sanctions . Whenever the reserve position of any bank computed in the manner specified in Sec. 1255 is below the required minimum, it shall pay the Central Bank one-tenth of one per cent (1/10 of 1%) per day on the amount of the deficiency: Provided, however , That a bank shall be permitted to offset any reserve deficiency occurring one or more days of the week covered by the report against excess reserves which it may hold on other days of the same week, and shall be required to pay the penalty only on the average daily net deficiency during the week. In case of abuse, a bank shall automatically lose the privilege of offsetting reserve deficiency in the aforesaid manner until such time that it maintains its daily reserve position at the required minimum for at least four consecutive weeks. As used in this section, "abuse" in the privilege of offsetting reserve deficiencies against excess reserves shall mean having reserve deficiencies occurring three or more times during any given week for four consecutive weeks, whether or not resulting in net weekly deficiencies. SUBSECTION 1256.1 Chronic reserve deficiency ; penalties . In cases where the bank chronically has reserve deficiency in deposit/deposit substitute liabilities, the bank shall be denied the credit facilities of the Central Bank; and the Monetary Board may: (a) limit or prohibit the making of new loans or investments by the bank; and (b) require that all or part of the net profit of the bank be assigned to surplus. The Board of Directors of said bank shall be notified of such chronic reserve deficiency and the penalties therefor, and be required to immediately correct the reserve position of the bank. As used in this subsection, "chronic reserve deficiency" shall mean having a net reserve deficiency for four consecutive weeks. SUBSECTION 1256.2 Failure to cover overdrawings with the Central Bank . In case a commercial bank fails to cover any overdrawings in its deposit account with the Central Bank not later than the next clearing day, it shall be excluded from such clearing, and it shall also be denied the credit facilities of the Central Bank. Such exclusion from clearing shall continue for as long as it has not maintained credit balances with the Central Bank for at least five consecutive banking days. If its clearing account is overdrawn for five consecutive banking days, it shall be prohibited from (a) making new loans or investments, except investments in government securities with Central Bank support; (b) declaring cash dividends until it has maintained credit balances in its Central Bank clearing account for at least fifteen consecutive banking days; and (c) establishing branches. The denial from availment of credit facilities of the Central Bank shall continue for as long as the bank has not maintained credit balances with the Central Bank for at least fifteen consecutive banking days. For purposes of computing the total available reserves against deposit/substitute liabilities, the total amount of overdrawing in the clearing account with the Central Bank shall be deducted from available reserves after the required reserves against marginal deposits and deposit substitute liabilities shall have been satisfied. SUBSECTION 1256.3 Unpaid fines . Where a bank maintains a demand deposit account with the Central Bank, fines, if unpaid within fifteen days from receipt of the assessment, shall be charged against its demand deposits with the Central Bank: Provided , That where the bank's credit balance is insufficient and it fails to settle the assessment within fifteen days from receipt, the Monetary Board may limit or prohibit the making of new loans or investments by the bank. SECTION 1257. Report on Compliance . Every bank shall make a weekly report to the Central Bank of its daily required and available reserves on deposit/deposit substitute liabilities to be submitted not later than the close of the fourth banking day following the reference week. This report shall be accomplished in the prescribed forms. SECTIONS 1258-1260. ( Reserved ) H. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS SECTION 1261. Schemes to Attract Deposits . The following rules shall govern promotional and other campaigns to attract deposits. SUBSECTION 1261.1 Raffles and lotteries . Any raffle or lottery conducted by any commercial bank shall conform with the following guidelines: a. The raffle/lottery can be offered only once every quarter; b. All savings accounts, except those in which no deposits or withdrawals have been made for a period of at least two years as of the week before the holding of the raffle/lottery, and time deposits shall qualify. The disqualification of savings accounts inactive for two years shall be clearly indicated in all announcements, promotions or advertising concerning the raffle/lottery; c. Each deposit account shall be entitled to only one prize; d. Accounts of personnel of the bank holding the raffle/lottery and those of their relatives within the first degree of consanguinity or affinity shall be disqualified; e. The total value of prizes, including donated prizes, in the raffle/lottery of each banking unit shall not exceed P10,000.00 for banks in cities and Metropolitan Manila, and P5,000.00 for banks in all other areas; f. The result of the raffle/lottery shall be appropriately announced; the list of winners and the corresponding prizes shall be posted in a conspicuous place within the bank premises and the winners shall be duly notified; and g. The result of such raffle/lottery shall be attested to by two authorized bank officers and reported to the Department of Commercial and Savings Banks of the Central Bank within 30 days from the date of the raffle/lottery. No promotional plan involving raffles/lotteries shall be advertised, promoted or implemented unless notification thereof has been submitted to the Central Bank at least 15 days prior to the holding of the raffle/lottery. The said notification shall contain the following minimum information: (1) The date and place of the raffle/lottery (2) The list and value of each prize (3) Other essential features (requirements for qualification, the determination of the winners, etc.) of the raffle/lottery. SUBSECTION 1261.2 Gifts or "giveaways ". As used in this subsection, the term "gift" or "give-away" shall mean anything of value given at no charge to a depositor by the depository bank as an inducement for the opening of a new, or the maintenance of an existing deposit account. The distribution of gifts or "giveaways" by commercial banks shall conform with the following guidelines: a. The period for the distribution of gifts or "giveaways" shall not exceed thirty (30) days and may be allowed only in connection with (1) the inauguration or transfer of office, (2) a bank anniversary celebration, and (3) the Christmas season. The distribution of gifts or "giveaways" on any occasion other than in Items (1), (2), or (3) shall require prior Central Bank approval. b. No cash, or check, certificate, or instrument (except government securities) which can be exchanged for cash, shall be allowed as gift or "give-away". c. The cost of each gift or "giveaway" shall not exceed twenty pesos (P20.00), including donations. d. In no case shall the money value of the gift or "giveaway" be credited to the deposit account. e. Each deposit account shall be entitled to only one gift or "giveaway". No promotional plan involving the distribution of gifts or "giveaways" shall be advertised, promoted, or implemented unless notification thereof has been submitted to the Central Bank at least 15 days prior to the start of the distribution of the gifts of "giveaways." The said notification shall contain the following minimum information: (1) The period and manner of distribution (2) The value and type, or form, of the gift or "giveaway". (3) The occasion for the distribution of the gift or "giveaway". With regard to the adoption of plans, schemes, or campaigns designed to promote the TIPID Movement and attract deposits in connection therewith, authorized banks are exempted from the provisions of Item "a" of this subsection: Provided, however , That all the other requirements of Subsecs. 1261.1 to 1261.4 shall be complied with. SUBSECTION 1261.3 Other Promotional schemes . Other plans, contests, or campaigns designed to attract deposits not falling under the provisions of Subsecs. 1261.1 and 1261.2 shall be subject to prior approval of the Central Bank. To provide sufficient time for consideration thereof, such campaign proposal shall be submitted to the Department of Commercial and Savings Banks of the Central Bank at least thirty (30) days before the intended date of implementation by banks in Metropolitan Manila, and at least forty (40) days by banks situated outside this area. SUBSECTION 1261.4 Sanctions . Non-compliance with the provisions of this section shall constitute sufficient grounds for the immediate suspension of the promotional activity and/or subject the bank concerned to administrative sanctions by the Central Bank. (As deleted by CBP Circular 1156 dated September 22, 1987) SECTION. 1262. Miscellaneous Rules on Deposits . Commercial banks shall be governed by the following miscellaneous rules on deposits. SUBSECTION 1262.1 Specimen signatures . All banking institutions are required to set a minimum of three specimen signatures to be simultaneously required from each of their depositors and to update the specimen signatures of their depositors every two years or sooner, at the discretion of the bank. Banks may, at their option, require their depositors to submit ID photos together with the specimen signatures. (As amended by CBP Circular 1175 dated April 26, 1988) SUBSECTION 1262.2 Use of SEC-prescribed format for certification on deposit . Banks are required to use the prescribed SEC form shown in Appendix 12 in confirming the paid-up capital of a proposed corporation registering with the Securities and Exchange Commission. Said certificate should be signed by a responsible authorized official of the bank and must be notarized. SUBSECTION 1262.3 Insurance on deposits . All banks shall indicate the coverage of the Philippine Deposit Insurance Corporation (PDIC) in each passbook, certificate of time deposit and/or cover of checkbook for demand deposit/ NOW account, stating among others, the maximum amount of the insurance. SECTION 1263. Booking of Deposits and Withdrawals . The following regulations shall govern commercial banks, thrift banks and specialized government banks on the booking of deposits and withdrawals. SUBSECTION 1263.1 Clearing cut-off time . As a general rule, all depositors and withdrawals during regular banking hours shall be booked as real accounts, i.e., credit or debit to deposit liability accounts on the date of receipt or payment thereof: Provided, however , That a bank may set a clearing cut-off time for its head office not earlier than two (2) hours before the start of clearing at the Central Bank, and not earlier than three and one-half (3-) hours before the start of clearing at the Central Bank, for all its branches, agencies and extension offices doing business in the Philippines, after which time, deposits received shall be booked as hereinafter provided: Provided, further , That banks which are located in areas where there are no Central Bank regional/clearing offices and which have their own clearing arrangements may set a clearing cut-off time not earlier than two (2) hours before the start of their local clearing after which time, deposits received shall be booked likewise as hereinafter provided. SUBSECTION 1263.2 Definitions . As used in the section, the following terms shall have the following meanings: a. "Regular banking hours" shall refer to the banking hours reported to the Central Bank pursuant to Sec. 1156, including the extended banking hours reported for servicing deposits and withdrawals; and b. "Clearing cut-off time" shall mean the bank's closing time for the acceptance of deposits in the form of checks, bills and other demand items which will be cleared with the Central Bank clearing office or regional clearing units on the day of their receipt. SUBSECTION 1263.3 Booking of cash deposits . Cash deposits received after the selected clearing cut-off time until the close of the regular banking hours shall be booked as deposits on the day of receipt. SUBSECTION 1263.4 Booking of non-cash deposits . Deposits of checks including "on us" checks, manager's/cashier's/treasurer's checks and demand drafts, which are drawn against the depository bank and all its offices, as well as treasury warrants and postal money orders, received after the selected clearing cut-off time until the close of the regular banking hours, may, at the option of the bank, be booked as deposits on the day of receipt. Other non-cash deposits received after the selected clearing cut-off time shall be treated as contingent accounts on the day of receipt and shall be booked as deposits the following banking day. SUBSECTION 1263.5 Booking of deposits after regular banking hours . Deposits, whether cash or non-cash, received after the close of the regular banking hours shall be treated as contingent accounts on the day of receipt and shall be booked as deposits the following banking day. aisadc SUBSECTION 1263.6 Other records required . For record and control purposes, banks shall prepare a daily abstract transactions treated as contingent accounts. SUBSECTION 1263.7 Notice required . Banks shall post at a conspicuous place near each teller's window a notice to depositors indicating their selected clearing cut-off time and a statement to the effect that non-cash items deposited after said cut-off time shall be treated as transactions for the next banking day. SUBSECTION 1263.8 Reports required . Banks shall submit a written notice on the selected clearing cut-off of all their offices to the appropriate supervising and examining department of the Central Bank not later than ten (10) banking days from April 18, 1980. The appropriate supervising and examining department shall be advised of any subsequent change thereon at least five (5) banking days before such change. SECTION 1264. Unclaimed Balances . All unclaimed balances, which include credits or deposits of money, bullion, securities or other evidences of indebtedness of any kind, and interest thereon, already reported to the Treasurer of the Philippines in accordance with the Unclaimed Balances Act (Act No. 3936, as amended by Presidential Decree No. 679 dated April 2, 1975) shall be transferred/reclassified from the deposit liability/ other credit accounts to the liability account, "Due to the Treasurer of the Philippines," until they are deposited with or turned over to the Treasurer of the Philippines upon order of the court that the same have been escheated in favor of the Government of the Republic of the Philippines and, as such, the unclaimed balances deposit liabilities shall no longer be covered by reserves required of deposit liabilities. SECTION 1265. Acceptance, Encashment or Negotiation of Checks Drawn in Favor of Commissioner of Customs . The full force of law shall be applied against any and all parties who commit any section leading to the irregular or unauthorized encashment of checks drawn in favor of the Commissioner/Collector of Customs or the deposit of said checks to the account of persons other than the Commissioner/Collector of Customs. All checks payable to the Commissioner/Collector of Customs shall be accepted for deposit only to the account of the Commissioner/Collector of Customs. Therefore, banks where the Commissioner/Collector of Customs has no account shall not encash, accept nor negotiate checks payable to the Commissioner/Collector of Customs. Any attempt to defraud the government or the bank through the irregular or unauthorized encashment or deposit of these checks to accounts other than that of the Commissioner/Collector of Customs must be reported immediately by the head of the banking office to the Bureau of Customs, copy furnished the Central Bank. SECTION 1266. Deposit Pick-up Services . Prior authority from the Central Bank is required before banks can engage in deposit pick-up services, subject to the following conditions: 1. Prior arrangement in writing shall be made between the bank and the clients deciding to avail of the service, which arrangement shall define and specify the respective responsibilities of both parties; 2. The pick up of deposits shall be made with the use of armored cars only which shall not be operated as a mobile bank nor shall be used in soliciting deposits from the general public. The armored car shall not be used in any manner in carrying out banking transactions/ services other than to afford security or deposit items in transit; 3. The deposit transactions shall be booked in accordance with existing regulations; 4. The risks of loss involved in the pick-up of deposits shall be adequately covered by insurance and the armored car to be used shall be provided with at least two (2) armed guards and supervised by at least two (2) officers of the Branch; 5. The use of a facility other than an armored car shall not be allowed; 6. Pick-up of deposits shall not be allowed on days other than the bank's regular banking days; 7. The strictest measures of safeguards, control and confidentiality will be adopted in implementing the services; and 8. Non-compliance with any of the above conditions shall automatically revoke the authority to pick up deposits. ( Effective April 16, 1985 ) SECTIONS 1267-1268. ( Reserved ) I. BORROWINGS FROM THE CENTRAL BANK SECTION 1269. Rediscount Ceilings ; Eligibility of Papers ; Maturities . The following are the rediscount ceilings, eligibility requirements and maturities of papers rediscounted with the Central Bank. SUBSECTION 1269.1 Rediscount ceilings . The rediscount ceilings of banks (banks with expanded commercial banking authority, commercial banks and thrift banks) and non-bank financial intermediaries authorized to perform quasi-banking functions shall be 100 percent (100%) of their networth as of the end of the quarter immediately preceding the date of application for Central Bank refinancing. The rediscount ceiling of branches of foreign banks shall be twenty-five percent (25%) of "Net Due To" plus assigned capital as of the end of the quarter immediately preceding the date of application for Central Bank refinancing. SUBSECTION 1269.2 Eligibility of papers . Credit instruments offered as collateral shall be subject to the eligibility requirements provided under Sections 87 and 88 of Republic Act No. 265, as amended. For non-traditional exports under D/A and D/P arrangements authorized by the Central Bank, the required letter of credit shall now be dispensed with and in lieu thereof, a deed of assignment of export proceeds shall be submitted in addition to the usual shipping documents and the promissory note of the borrowing bank concerned. Papers presented for rediscounting with the Central Bank by commercial banks pertaining to firms and/or principal stockholders and offices thereof with outstanding loans with the Development Bank of the Philippines, the Philippine National Bank, the Government Service Insurance System, the Social Security System and/or the Reparations Commission may now be accepted on the basis of a certification of the borrower/firm, duly endorsed by the commercial bank concerned that it or its stockholders and/or officers have no arrearages on their loan accounts with these government institutions. It is understood, however, that should the random examination undertaken by Central Bank examiners disclose that the paper rediscounted with the Central Bank involve loan accounts with any of the abovementioned government institutions that are with delinquencies or are in arrears, the demand deposit account with the Central Bank of the commercial bank concerned shall be automatically debited for the full amount of the loan still outstanding, plus accrued interest due thereon, without prejudice to the imposition of administrative sanctions provided for under Section 34-A of Republic Act No. 265, as amended. SUBSECTION 1269.3 Maturities . The maturity of Central Bank loans or advances/rediscounts for commercial credit shall not exceed 180 days from the date the proceeds of such loans or advances/rediscounts are released to the applicant bank while those for production credit shall not exceed 360 days from the date the proceeds for such loans or advances/ rediscounts are released to the applicant bank. Furthermore, advances against Treasury Bills shall not exceed sixty days from the date of rediscount while those advances against other government eligible securities shall not be more than 180 days from date of rediscount. The maturity date of the loan from the Central Bank which shall be indicated in the promissory note of the applicant bank shall be the maturity date of the collateral paper with the latest maturity. Should any amount remain outstanding on that date, the Central Bank shall debit the borrowing bank's clearing account on such date for that amount plus accrued interest due. SECTION 1270. Qualifications/Disqualifications for Availment ; Penalties . The following are the qualifications/disqualifications for availment of Central Bank credit facilities and the penalties that shall be imposed for violation of any of the provisions. SUBSECTION 1270.1 Qualifications for availment of credit facilities by commercial banks . The following are additional qualifications for the continuity of availment of the privilege of access by commercial banks to the credit facilities of the Central Bank: a. The ratio of banks' past due direct and indirect loans to its stockholders, directors and officers, and related interests as defined under Subsec. 1326.1 to its aggregate past due loans as of the last examination by the Department of Commercial and Savings Banks must not exceed five per cent (5%). Papers covering loans to the bank's own stockholders, directors and officers, whether directly or indirectly, shall not be acceptable for rediscounting if the loans pertaining to such papers are over and above their respective equity. Moreover, papers of these stockholders, directors and officers which appear as new loans but which are in reality renewed notes shall be assessed an interest rate of fourteen per cent (14%) per annum, and the full amount of the covering credit shall automatically debited against the clearing account of the bank concerned considering that renewed loans are not acceptable for rediscounting under existing regulations. In determining the five per cent (5%) required ratio of past due direct and indirect loans to its stockholder, directors, officers and related interests to its aggregate past due loans, matured past due advances on exports shall be excluded : Provided , That: (1) such advances are past due loans for not more than thirty (30) days, and (2) the effective rate of interest to be charged by banks on their loans for financing exports shall not exceed the rate provided in Sec. 1271.2 b. The paid-up capital of a commercial bank applying for credit availment from the Central Bank should amount to at least P100 million at the time the application is filed, in accordance with the increased capitalization program of commercial banks; and c. The capital accounts of the commercial banks, as adjusted, to cover any valuation reserves recommended to be set up by the accounts should meet the minimum capital required under Section 22 of Republic Act No. 337, as amended. cdt d. Required reports must be submitted on time to the various departments and/or offices of the Central Bank. e. Compliance with the investment-deposit ratios for four consecutive quarters shall be one of the conditions for the processing and/or approval of any application or request to avail of Central Bank credit facilities, except as may be allowed under Section 90 of Republic Act No. 265, as amended. SUBSECTION 1270.2 Suspension of rediscounting privilege . The following are the grounds for suspension of rediscounting privilege from the Central Bank: a. When bank has chronic reserve deficiency in deposit/deposit substitute liabilities. b. When bank fails to cover any overdrawings in its deposit accounts with the Central Bank; and c. When bank has deficiency in required liquidity floor for government deposits. SECTION 1271. Loan Values ; Rediscount and Lending Rates for Preferential Rediscounting . The following rules and regulations shall govern the loan values and rediscount rates of the Central Bank for preferential rediscounting and the lending rates that may be charged by banks on paper rediscounted with the Central Bank. SUBSECTION 1271.1 Loan Value, Rediscount and Lending Rates . The loan value and rediscount rate for the rediscount facility of the Central Bank shall be as follows: Eligible Paper Loan Value Rediscount Rate (in %) (In %) Per Annum Agricultural Production, Cottage and Small Industries Credits, 80 12.75 General Purpose Working Capital Financing and Other Short-Term Credits The lending rates that the banks may charge on their rediscounted papers shall not be subject to any ceiling. However, the spreads made by banks shall be closely monitored periodically by the Central Bank to ensure that these are consistent with the prevailing market rates. ( Effective Nov . 29, 1985 ) Note : Amendments of 1271 as provided by the following CBP Circulars: 1) CBP Circular 1114 dated September 1, 1986; 2) CBP Circular 1125 dated December 15, 1986; 3) CBP Circular 1203 dated June 23, 1989; 4) CBP Circular 1252 dated September 14, 1990; 5) CBP Circular 1260 dated October 30, 1990; 6) CBP Circular 1363 dated October 29, 1992; 7) CBP Circular 1387 dated March 17, 1993 and; 8) BSP Circular 1 dated July 30, 1993 SUBSECTION 1271.2 Scope/Definition of Areas of Rediscounting a. Agricultural production credits are short-term credits granted for rice, corn, sugar cane, sugar (inclusive of sugar quedan), coconut, feed grains, livestock, poultry, vegetable, aquaculture, tobacco, cotton and other products as may be determined by the Central Bank. b. Loans generated from Special Time Deposits (STDs) shall not be eligible for rediscounting. ( Effective Nov . 29, 1985 ). SUBSECTION 1271.3 Maximum bank lending rate, defined . Except with respect to papers with original maturities of more than three hundred sixty five (365) days referred to in Items b(2) of Subsecs. 1271.1 and 1271.2, the maximum bank lending rate shall be the effective rate, inclusive of service and other charges as herein prescribed. The interest rate ceiling shall apply to the entire amount of the loan granted, and not only to the rediscounted portion thereof. The grant of rebates for prompt payments shall be optional on the part of the lending bank/NBQB. SECTION 1272. Remittance of Collection ; Repayments ; Arrearages . The following regulations shall govern remittance of collection, repayments and arrearages: a. Collections received before maturity of the collaterals for loans and advances from the Central Bank shall be remitted to the Department of Loans and Credit, Central Bank of the Philippines, not later than two (2) banking days following the date of receipt of collections by Head Office/branches located within Metro Manila and not later than four (4) banking days following the date of receipt of collections by Head Office/branches located outside Metro Manila. In the case of negotiated export bills, when the bank receives the corresponding payment from its correspondent bank either through actual remittance or credit advice or through entry(ies) charging its correspondent bank before receipt of advice, the amount involved shall be remitted to the Department of Loans and Credit, Central Bank of the Philippines, not later than two (2) banking days following the date of receipt of payment and/or entry(ies) by Head Office/branches located within or outside Metro Manila. To check compliance with the above regulations, the Head Office shall require its branches to submit a report of collections duly certified by the branch manager. b. Whenever any collateral matures before the maturity date of the loan from the Central Bank, the corresponding loan value thereof shall be debited against the bank's demand deposit account with the Central Bank, including the accrued interest thereon. c. Substitution of collaterals on outstanding loans with the Central Bank shall not be allowed. d. In accordance with Section 92 of the Central Bank Act, as amended, the documents offered as collateral shall be endorsed by authorized officers of the applicant bank. e. The sanctions/penalties shown in Subsec. 1273.2.e shall be imposed on commercial banks for unremitted collections/delayed remittances of collections in violation of Item a of this subsection and for delayed recording of corresponding credit advices received from foreign banks. SECTION 1273. Rediscounting of Specific Papers . Rediscounting of specific papers shall be governed by the regulations enumerated hereunder. SUBSECTION 1273.1 Open covering export products under the Export Priorities Plan of the Board of Investments a. Eligibility of papers . Credit instruments pertaining to firms registered with the Board of Investments as registered exporters under the provisions of Republic Act No. 6135, as well as to Central Bank certified export-oriented industries, may be presented for rediscounting with the Department of Loans and Credit, Central Bank, provided they are eligible and acceptable under Section 87 of Republic Act No. 265, as amended, as well as under the third paragraph of Subsec. 1269.2. The application for rediscounting shall be supported by, among others, a certification of the applicant bank to the effect that the products to be benefited by the rediscounting are actually to be exported. b. Loan value . The provisions of Subsec. 1271.1 shall govern the loan values for papers mentioned in this subsection. c. Rediscount rate . The provisions of Subsec. 1271.2 shall govern the rediscount rates for papers mentioned in this subsection. It is understood that credit instruments covering any product that is delisted from the Export Priorities Plan (See Appendix 13) shall no longer be rediscountable at the preferential rate stated in Sec. 1271.2 one month after the approval date of the new Plan. d. Maturities . Loans and advances against eligible export papers covering packing credits shall have a maturity period of not exceeding 90 days which may be rolled-over for another 90 days at the prevailing rediscount rates. Subsequent roll-overs, however, shall be assessed a rediscount rate of 24% p.a. It is understood that in no case shall the maturities of CB loans and advances extend beyond the expiry date/validity period of the assigned L/C/PO/SC. The maturity of negotiated sight export bills shall be computed as thirty days after date of the draft; time export bills shall be computed as thirty days after date of draft plus usance. e. Ceilings . Commercial banks, for purposes of rediscounting their export papers with the Central Bank, may avail themselves of another additional 50% ceiling based on their existing basic rediscount ceiling, in effect increasing export financing for all commercial banks to 100% of their basic rediscount lines. It is understood, however, that availments under this authority may be allowed only where the commercial bank's basic rediscount ceiling and the additional 50% ceiling authorized under the first paragraph of Subsec. 1273.2.a shall have been fully utilized. SUBSECTION 1273.2 Papers covering non-traditional exports/small-scale/ cottage industries and the production/exports/trading of sugar, rice and tobacco a. Ceilings . Any bank that is eligible to rediscount and whose rediscount ceiling has already been saturated or fully availed of shall be entitled to an increase in its existing rediscount ceiling to the extent of 50%, which shall be used exclusively for financing non-traditional exports/small scale/cottage industries with assets not exceeding P1million, and the production/exports/trading of sugar, rice and tobacco: Provided , That availments for the production/exports/trading of sugar, rice and tobacco shall not exceed one-half () of the 50% increase in its rediscount ceiling. b. Loan value, rediscount rate, maximum bank lending rate . The provisions of Subsecs. 1271.1 and 1271.2 shall govern the loan value, rediscount rate and maximum bank lending rate for papers mentioned in this subsection. c. Application to rediscount . Applications for loans and advances covering purchase orders (POs), sales contracts (SCs) should indicate the following: 1) PO/SC Number 2) Date of PO/SC 3) Validity Period/Date 4) Mode of Payment (whether by L/C, D/A, D/P, O/A) If payment is by way of letter of credit (L/C), such L/C should specifically state the particular PO/SC and a photo-copy of such L/C should be submitted immediately but not later than 5 days from receipt thereof to the Department of Loans and Credit, Central Bank, to replace the assigned PO/SC. Similarly, applications covering export bills should be supported with a certification to the effect that the exporter-borrowers' packing credits rediscounted with the Central Bank had been liquidated by the exporters concerned and that the corresponding loan values had been fully settled with the Central Bank and/or, in case of partial negotiations of L/Cs, the corresponding amounts had been applied in partial payment of the exporters' packing credit advances and the proportionate loan values had been remitted to the Central Bank. A pro-forma certification is shown in Appendix 14. Promissory notes rediscounted with the Central Bank, which are secured by export L/Cs/POs/SCs, shall contain a clause or rider to the effect that a penalty rate equivalent to the difference between the minimum interest rate on emergency advances of 24% p.a. and the applicable CB rediscount rate shall be imposed, in the event the exporter fails to negotiate the LC/PO/SC securing the note within one month after expiry date/validity period of the LC/PO/SC. d. Rediscount proceeds . The proceeds of any rediscounting application covering non-traditional exports shall be credited to the demand deposit account of the applicant commercial bank on the same date the said application is filed with the Department of Loans and Credit, Central Bank, provided such application is received at or before 12:00 noon and the supporting papers are complete. e. Penalties . The penalty rates to be charged commercial banks for any of the following violations shall be the equivalent of the difference between the minimum interest rate on emergency advances of 24% p.a. and the rediscount rate of their loans and advances: 1) Use of ineligible/unacceptable collaterals as security for rediscounted loans and advances; 2) Non-negotiation, one month after expiry date/validity period of the L/C and/or PO/SC up to an amount equivalent to at least the face value of the rediscounted promissory notes, unless the CB has earlier received a written notice of extension of the expiry date of L/C or validity period/date of PO/SC as the case may be, from the commercial bank concerned; and 3) Non-remittance or delayed remittance of the corresponding loan values of collections on rediscounted notes, including delayed recording of corresponding credit advices received from foreign banks in violation of Sec. 1272. It is understood, however, that the recurrence of unremitted collections shall be a ground to additionally impose on the bank a fine of five hundred pesos (P500.00) per day of delay commencing from the day immediately after the deadline provided above. Moreover, the erring bank shall be warned that in addition to the imposition of the penalty rate and fine mentioned above for succeeding offenses, the responsible officials involved will be subject to suspension/dismissal in accordance with the provisions of Section 34-A of Republic Act No. 265, as amended. In the determination and computation of penalty as stated above, the "offenses committed by erring bank(s)/responsible official(s) shall be counted/reckoned on a per day and not on a per transaction basis. For this purpose, the demand deposit account of the commercial bank concerned shall be debited immediately for the corresponding loan value of collateral securing its loans/advances and the applicable interest rate plus the aforementioned penalty rate, for any of the above violations. SUBSECTION 1273.3 Papers pertaining to agrarian reform credit relative to Presidential Decree No . 717 . The rediscounting by commercial, rural and thrift banks of eligible credit instruments pertaining to agrarian reform credit as defined in Presidential Decree No. 717 dated May 29, 1975 shall be governed by the following rules and regulations: a. Papers required . A commercial, rural or thrift bank desiring to avail itself of the rediscounting privilege of the Central Bank against agrarian reform credit papers shall file the corresponding application indicating, among others, the following: 1) Amount applied for; 2) Term of the loan or advance applied for; 3) Purpose(s) of the loan or advance; and 4) Nature of the loan or advance whether supervised credit or non-supervised credit which must be supported by the following: (a) Non-Supervised Credit . Applications for discount and/or rediscount by commercial banks with the Central Bank shall be accomplished in duplicate by the applicant bank on a prescribed form (DLC Form No. 1 Application for Discount and/or Rediscount, Loan or Advance), supported by a list or lists of the papers offered as collateral for the loan or advance on the prescribed form. (b) Supervised Credit . In addition to the papers mentioned in Item (a) above, the following shall also be submitted in connection with loans or advances under the supervised credit scheme: i) Duly accomplished farm plan and budget, which shall be prepared by an accredited technician who should be knowledgeable about the project being financed; and ii) Certification by a Government Technician that the papers being rediscounted cover loans granted to beneficiaries of agrarian reform. b. Eligible Papers . Credit instruments offered as collateral for a loan or advance shall be subject to the eligibility requirements provided under Section 87 of Republic Act No. 265, as amended, for commercial and thrift banks. For papers covering loans under the Masagana 99 Masaganang Maisan and Feed-grains Programs, the maximum loan amount per hectare shall be P1,600.00 for Masagana 99; P500.00 for corn and sorghum and P650.00 for soybeans. As regards commercial credits, the maturity date of saw instruments shall not exceed 180 days from date of rediscount, while for production credits, it shall not exceed 360 days also from the date of rediscount or acquisition by the Central Bank. c. Loan values . The provisions of Subsec. 1271.1 shall govern the loan values for agrarian reform credit papers. d. Rediscount/interest rates. The provisions of Subsec. 1271.2 shall govern the rediscount and interest rates for agrarian reform credit papers. It is understood that all unsecured loans to beneficiaries of agrarian reform under the "Masagana 99" and "Masaganang Maisan" financing programs shall have an Agricultural Guarantee Fund coverage in order to be eligible for rediscounting at the preferential rate of 1%. e. Maturity period . The maximum periods for rediscounting or advances against eligible papers shall be as follows: 1) For loans secured by agricultural papers for the production of rice not exceeding 270 days; and for corn and commercial papers not exceeding 180 days. 2) For loans secured by other production credit papers not exceeding 360 days. It is understood that the terms of the loans granted by institutional borrowers shall be synchronized with the maximum maturities of their own loans from the Central Bank as outlined in Appendix 15. f. Credit limit . Borrowings secured by agrarian reform credit papers shall be chargeable against the rediscounting ceiling of commercial and thrift banks. g. Repayments . The loan value, plus accrued interest, of collections received before maturity of the collaterals or of maturing collaterals shall be immediately remitted to the Central Bank. SUBSECTION 1273.4 Papers governing the Aromatic Tobacco Trading Loan Fund Program . The revised rules and regulations embodied in Sec. 1356 shall govern applications of authorized commercial banks for STD/rediscounting with the Central Bank in connection with this program (formerly Virginia Tobacco Trading Loan Fund). SUBSECTION 1273.5 Papers of exporters of services and construction contracts . Papers of exporters of services and construction contracts shall be considered eligible for rediscounting under Section 87 (b-1) of Republic Act No. 265, as amended, subject to the following terms and conditions: a. The eligible papers shall be secured by at least the assignment of payments of the civil/construction/labor contracts, to be supported by the award of such contracts with approval/confirmation by an appropriate Philippine government agency or performance bond, if required, and other evidences to prove existence of said contracts; b. Rediscounting against such papers shall be under the same terms and conditions as those for export-oriented industries under Sec. 1271 and shall have maturities not to exceed 180 days from date of availment, or not later than the expiration of the contract, whichever comes first; and c. Availments under this facility shall be chargeable against the rediscount ceiling of the banking institution concerned. SUBSECTION 1273.6 Masagana 99 and Masaganang Maisan papers . a. Terms of CB rediscounts Commercial banks may rediscount eligible Masagana 99 and Masaganang Maisan papers at 100% loan value of the outstanding balance or unpaid portion thereof and at the preferential rate of 3% per annum, subject to the following conditions: (1) That the loans granted to farmer-borrowers shall be strictly under a supervised credit scheme as described under Sec. 1345. The borrowers/projects financed by these loans shall be reviewed from time to time by Agricultural Credit Supervisors of the Central Bank to determine their compliance with these guidelines. (2) All unsecured loans shall be covered by guarantee under the Land Bank "Agricultural Guarantee Fund". (3) An interest reduction of two (2) per cent per annum may be granted to farmer-borrowers who fully liquidate their loans on or before maturity in which case the interest collected shall not exceed fifteen per cent (15%) per annum. For this purpose, a stipulation to this effect shall be embodied in the covering promissory note of the farmer-borrowers, otherwise, the promissory note is not eligible and acceptable for rediscounting. b. Rediscount quota . There shall be no limit on the amount of loan application and the number of times a bank may avail itself of rediscounting facilities of the Central Bank: Provided , That such availments shall not exceed its rediscount ceiling as provided for under Subsec. 1269.1. c. Qualifications for availment . The qualifications for availment by commercial banks of the credit facilities of the Central Bank are provided for under existing regulations. Additionally, in the case of a commercial bank, it must have no overdrawings in its clearing account with the Central Bank and shall have no deficiency in the required liquidity floor of Central Bank-supported securities against government deposits. d. Maturity period . The maturity of Central Bank loans or advances secured by eligible Masagana 99 and Masaganang Maisan papers covering production credits shall not exceed 210 days and 150 days, respectively. e. Documentary requirements . All banks applying for a loan with the Central Bank shall submit to the Department of Loans and Credit the following papers: (1) Loan application in duplicate, duly accomplished and signed by two (2) duly authorized officers of the bank; (2) Original and two (2) copies of the bank's promissory note in favor of the Central Bank, also duly signed by the authorized officers of the bank; (3) Certifications by the bank technician(s) that the loans listed in the rediscount schedules were granted under the supervised credit scheme, and by the bank president/manager that the unsecured loans pertaining to "Masagana 99 and Masaganang Maisan" are covered by the Agricultural Guarantee Fund; and (4) Rediscount schedule supported by: (a) Farmer-borrowers' promissory notes duly endorsed by two (2) authorized officers of the bank; (b) Farmer-borrowers' applications and farm plans and budgets consolidated in one sheet (back to back); (c) Certification by barangay captain as to identity of Masagana 99 or Masaganang Maisan farmer-borrower that such borrower is a bona-fide member of a selda of his barangay and cultivating a certain hectarage of riceland or cornland; (d) Real estate mortgage or chattel mortgage duly registered, if the loans are covered by a mortgage on real estate or personal properties; and (e) Co-maker's statement in the absence of real estate mortgage or chattel mortgage. SUBSECTION 1273.07 Papers covering pledges of blue chip/high grade shares of stock (bank borrowers' share holdings) . The following guidelines shall govern the rediscounting of promissory notes supported by pledges of blue chip/high grade shares of stock: a. Coverage . Promissory notes held by banks secured by pledges of high grade/blue chip shares of stock shall be eligible for rediscounting with the Central Bank. b. Criteria for selecting high grade/blue chip shares . The Central Bank, in consultation with the Securities and Exchange Commission shall determine what are high grade/blue chip shares for purposes of this subsection. c. Terms and conditions of rediscounting 1) The promissory notes shall be rediscounted at 80% loan value of the face amount/outstanding balance thereof as of the date of rediscounting: Provided , That the total face amount/outstanding balance of paper belonging to one borrower which may be rediscounted with the Central Bank shall not exceed P100,000; 2) Rediscounting availments shall be assessed an interest of 8% per annum, in accordance with Item a(2)(b) of Subsec. 1271.2; 3) The rate of interest that may be charged by banks on paper rediscounted with the Central Bank in accordance with the provisions of this subsection shall not exceed 14% per annum inclusive of service and other charges; 4) The period for each rediscounting availment shall not exceed one hundred eighty (180) days; and 5) Upon maturity of the loan, the bank's demand deposit account with the Central Bank shall be automatically debited for the principal amount or outstanding balance thereof, plus accrued interest. d. Eligible banks . Banks that meet the following requirements shall be allowed to avail of this rediscounting facility: 1) Those without serious exceptions or deficiencies in their operations; and 2) Those eligible to rediscount with the Department of Loans and Credit, Central Bank (DLC-CB), under existing rules and regulations and with unused rediscounting ceiling at the time of application for rediscounting. SUBSECTION 1273.8 Papers covering tax credit certificates . The following regulations shall govern the rediscounting by commercial banks with the Central Bank of credit certificates issued by the Bureau of Customs to exporters who are entitled to tax refund or tax credit under Section 106 (c) of the Tariff and Customs Code of the Philippines, as amended: a. Eligibility of papers . Commercial banks may grant loans to exporters on the security of negotiable tax credit certificates, covered by a Deed of Assignment thereof, which, together with the covering borrower's promissory note, shall be considered eligible and acceptable as collateral for loans or advances under Section 87 of Republic Act No. 265, as amended: Provided , That the tax credit certificates are issued after the effectivity date of the Customs Administrative Order approved on January 9, 1981. b. Collateral value . The maximum amount of loan(s) that a commercial bank may extend to the exporter-borrower(s) against tax credit certificate(s) shall be 80% of its face value or outstanding unpaid balance, whichever is lower. c. Loan value, rediscount rate, and bank lending rate . The loan value, rediscount and maximum bank lending rates on credit instruments covering loans granted against tax credit certificate(s) shall be the same as those for traditional export papers. d. Maturity . Central Bank loans or advances for papers covering tax credit certificate(s) shall have a maturity of not exceeding 180 days from date of credit or the maturity date of the tax credit certificate(s) whichever comes first, and shall be subject to roll-over up to the due date of the rediscounted tax credit certificate(s). e. End-use borrower . The end-use borrower of a loan secured by a tax credit certificate(s) shall be limited to the exporter to whom the certificate(s) was originally issued (payee) or the last endorsee (holder in due course) who is also an exporter. f. Ceiling on bank borrowings . Availments of CB loans or advances secured by these tax credit certificate(s) shall be chargeable against the commercial bank's basic rediscount ceiling. SUBSECTION 1273.9 Papers covering high priority projects against pledge of amortizations due within ten years . Commercial banks authorized to engage in expanded banking activities (unibanks), the Development Bank of the Philippines and the Land Bank of the Philippines may avail themselves of the special credit facilities extended under Section 88-A of the Central Bank Act, as amended, thru advances against pledge or assignment of payments, installments or amortizations falling due within a period of not exceeding ten (10) years covering high priority projects at a loan value of 75%, with a maximum maturity period of ten (10) years, at a rediscount rate of 11% p.a. and a maximum lending rate of 16% p.a. The following guidelines shall govern availments against the special credit facility of the Central Bank for medium and long-term financing to commercial banks authorized to engage in expanded banking activities (unibanks), the DBP and the LBP as embodied under the first paragraph of this subsection and Subsec. 1273.10. a. Purpose . The special credit facility shall be granted to provide financial assistance to viable industries engaged in high priority activities and for investments by the above-mentioned banks in equities of subsidiaries/affiliates and other firms as authorized under the unibanking law. This financial assistance may also be utilized for investments by the said banks in high grade shares listed in the stock exchanges as may be determined by the Central Bank in consultation with the Securities and Exchange Commission (SEC). This special credit facility shall give priority to projects requiring peso financing necessary to complete the funding of projects eligible and acceptable for financing under the APEX program. The financing of proposed foreign exchange requirements from the medium- and long-term window shall be suspended until further notice. Only peso requirements shall therefore be acceptable for financing in the meantime. b. Eligible projects/equity investments . Projects eligible for this special credit facility through the unibanks, DBP and LBP shall be those considered as high priority economic activities including, but not limited to the following: 1) Projects registered under the Investment Priority Program (IPP), Export Priority Program (EPP), and Agricultural Priority Program (APP), of the Board of Investments; 2) Small and medium scale industries; 3) Production of export goods and services; 4) Export trading of non-traditional items; 5) Health and educational projects; and 6) Facilities for shipping and freight services. Proceeds of the loans pertaining to Items (1) to (6) of this subsection shall be utilized for (a) working capital requirements, (b) acquisition of plant sites and construction of factory buildings and facilities, (c) local purchases of machinery and equipment or (d) development/expansion of existing projects or a combination of any or all of these purposes. The special financing facility may also be availed of against investments in equities of subsidiaries/affiliates and other firms as well as in high grade shares mentioned in Subsec. 1273.9.a. c. Eligible collateral . Papers offered as collateral shall be subject to the eligibility requirements provided for under Section 88-A of Republic Act No. 265, as amended, and the first paragraph of this subsection and Subsec. 1273.10, specifically the following: 1) Financial assistance . The payments, installments or amortizations to be pledged or assigned shall be those falling due on a staggered basis i.e., quarterly, semi-annually, annually, over a period not exceeding ten (10) years from the date of loan application, which shall in no case be in arrears and are adequately secured by real or chattel mortgages related to transactions covering high priority projects, mentioned in Item "b" of this subsection. Repayments on principal may be allowed a grace period of one or two (2) years, provided that the maturity period of the assigned accounts will not be beyond five (5) years and ten (10) years, respectively, and provided further that interest shall be collected at the end of each scheduled amortization period. 2) Equity investments a) The applicant bank's holdings of shares of stock of its subsidiaries/affiliates and equities in other firms shall be subject to the limitations under Secs. 1378 to 1380 on equity investments of unibanks. b) High grade shares to be pledged shall be those listed in the stock exchanges as mentioned in Subsec. 1273.9.a hereof; d. Documents required . To avail of advances under this special credit facility, the following documents and supporting papers shall be submitted: 1) Application for loan or advance in the prescribed form together with the rediscount schedule(s) and the covering promissory note signed by two (2) duly authorized officers of the bank in favor of the Central Bank; 2) Deed of Assignment covering the payments, installments or amortizations offered as security for the loans, for advances covering high priority projects; 3) Collateral promissory notes duly endorsed by two (2) authorized officers of the bank; 4) Real estate mortgages with the corresponding transfer certificate of title/chattel mortgages with the latest inventory listing and valuation as well as the appraisal report on the collateral offerings; 5) Certification of the applicant bank to the effect that the payments, installments or amortizations to be pledged or assigned to the Central Bank are in no case currently in arrears and that they are related to credit operations which are adequately secured by mortgages; 6) Copy of the latest audited financial statements of the bank's borrowers; and 7) In the case of advances against investment in equities, the shares of stock offered as collaterals together with the covering Deed of Pledge. e. Loan values, rediscount rates and maximum bank lending rates . The loan values, rediscount rates and maximum bank lending rates of the papers offered as security for the loan or advance shall be as follows: CB Redis- Maxi Loan count mum Bank Collateral Value Rate Lending Rate 1) Pledge or assignment 75% 11% p.a. 16% p.a. of payments, install- ments or amortizations on loans pertaining to high priority projects of bank's borrowers falling due within a period not exceeding ten (10) years 2) Investment in equities 70% 14% p.a. of affiliates/subsidia- ries/other firms as well as in high grade securities The maximum bank lending rate shall be the effective rate, inclusive of service and other charges, and shall apply only to the rediscounted portion thereof. f. Maturity period . The maturities of the loans or advances from the Central Bank shall be as follows: Collateral Maturity Period 1) Pledge or assignment of payments, installments or amortizations covering high priority projects: (a) For working capital Not to exceed three (3) requirements and/or years; non renewable refinancing thereof; (b) For acquisition of fixed Not to exceed ten (10) asset development/ years; non-renewable expansion of existing projects and/or refinancing 2) Shares of stock of subsidiaries/ Not to exceed seven (7) affiliates/other firms years; non-renewable 3) High grade securities Not to exceed one (1) year g. Other terms and conditions 1) Availments maturing within one (1) year by unibanks, DBP and LBP of this credit facility shall be chargeable against their respective unutilized basic rediscount ceiling; 2) Proceeds of advances under this facility shall not be utilized to finance the repayment of foreign exchange obligations or to service foreign exchange requirements of projects except in case of the importation of capital equipment which shall be limited to an amount equivalent to $1million; 3) Rediscounted loans to eligible projects shall be subject to the single borrower limitation under Section 23 of Republic Act No. 337, as amended; 4) Syndicated loans shall be acceptable only if the participating banks are eligible under this program; and 5) The evaluation of the project financed shall be the responsibility of the lending bank. Additional conditions may be authorized by the CB to be imposed by borrowing banks as circumstances warrant, to ensure the continuing financial viability of CB-assisted projects. h. Repayments with Central Bank . The equivalent loan values of the assigned payments, installments or amortizations due plus accrued interest shall be automatically debited against the demand deposit account of the borrowing bank with the Central Bank not later than the tenth (both) day of the month following the scheduled payment date. cdlex Likewise, the loan values of the collateral promissory notes for advances against the aforementioned investments in equities or high grade shares shall be automatically debited against the bank's demand deposit account upon their maturities. The corresponding loan value of collections received by the bank before the due dates of the assigned payments, installments or amortizations and on maturities of the promissory notes as well as any cash dividends on the pledged shares of stock shall be remitted immediately to the Department of Loans and Credit, Central Bank, to be applied in partial/full payment of its outstanding obligations. SUBSECTION 1273.10 Advances from CB secured by bank's share holdings . Unibanks, the Development Bank of the Philippines and the Land Bank of the Philippines may avail themselves of advances under Section 88-A of the Central Bank Charter, as amended, to be secured by their holdings of shares of stock of their subsidiaries/affiliates and also in high grade shares listed in the stock exchanges as may be determined by the Central Bank in consultation with the Securities and Exchange Commission as well as in the equities of other firms as authorized under the unibanking law, at 70% loan value, with interest at 14% p.a., and maximum maturity period of five (5) years. SUBSECTION 1273.11 Advances to commercial bank for sale/deposit or foreign currency notes/coins . Any commercial bank which sells to the Central Bank foreign currency notes/coins, and/or deposits with the Central Bank US dollar notes, apart from those covered by the foreign currency deposit system under existing regulations may be allowed the privilege of access to a special credit facility with the Central Bank under the following terms and conditions: a. The qualified commercial bank may apply for a loan/advance based on: (1) the amount of deposit with the Central Bank of the date immediately preceding the filing of application for a loan/advance; or (2) total amount of US dollar notes sold to Central Bank as of the end of every month; b. The collateral for the loan/advance shall be an assignment of the certificate of deposit or any eligible collateral as defined under Section 87 of Republic Act No. 265, as amended; c. The loan values, rediscount rate and maturity of the loan/advance shall be as follows: 100% of US dollar 12% Not to exceed 90 days, notes sold to CB renewable for another 90 days 50% of US dollar 12% 180 days, or the maturity notes deposited of the time deposit with with CB CB, whichever is earlier; d. The loan/advance may be granted automatically upon presentation of a letter assigning the time deposit, or the receipt evidencing the sale of US dollar notes to the Central Bank with the eligible collateral; e. This facility shall be made available to qualified commercial banks with a minimum deposit balance of US$3 M or minimum sales of US$1 M each month; and f. Availment of this special credit facility shall be subject to the submission by the applicant bank of a certification, among others, from (1) International Treasury on the outstanding foreign currency notes deposited with the Central Bank on the date immediately preceding the filing of the application for a loan/advance and/or (2) the Cash Department on the total amount of such notes sold to the Central Bank as of the end of the preceding month, as the case may be. SUBSECTION 1273.12 Papers pertaining to the Maisagana Program . The following requirements shall be complied with by banks other than rural banks desiring to participate in the Maisagana Program: a. The bank's ratio of past due loans to total loan portfolio shall not exceed 20%; b. The bank has not incurred chronic deficiencies in reserve requirements and capital requirements during the last six months prior to participation in the Maisagana Program; and c. There are no irregularities/major violations in the operation of the bank. Past due loans of farmer-borrowers under the Maisagana Program shall be excluded in the computation of the total past due loans of banks seeking financial assistance from the Central Bank. SUBSECTION 1273.13 Papers covering the Consolidated Special Agricultural Rehabilitation Fund . The following rules shall govern the participation of rural banks, ACA and PNB branches in the financing program under the Consolidated Special Agricultural Rehabilitation Fund (Consolidated SARF). a. A rural bank/ACA/PNB branches qualified to participate under Consolidated SARF may avail of the said SARF as agent of the Central Bank by filing an application in the prescribed form with the DRBSLA not later than the date recommended by the Ministry of Agriculture (MA). Such rural bank/ACA/PNB branch shall submit a sworn written undertaking that it will restructure past due loans affected by typhoons over a period of two and one-half (2-) years for irrigated areas and three (3) years for rainfed areas. b. Only rural banks that are not eligible for Central Bank financial assistance in the form of special time deposits and rediscounting and ACA/PNB branches shall be allowed to participate under this program. c. In order to be eligible for financing under the program, the farmer-borrower should meet the following requirements: (1) The farmer-borrower must be certified to by the PPO or other authorized representative of the Ministry of Agriculture, and for rice farmers, there must be further certification by the National Irrigation Authority (NIA), Farm System Development Corporation (FSDC) or by an authorized representative of the MA that the rice land he is cultivating is serviced by the NIA or otherwise adequately irrigated. A certification to this effect by the President/Manager of the applicant rural bank/ACA/PNB branch shall likewise be appended to the list. (2) The farmer-borrower must have suffered production losses due to typhoons. d. Loans granted shall not exceed the prescribed rate of the pertinent supervised credit scheme. e. Loans granted under the program shall be for a period not exceeding 180 days at an interest rate of 10% per annum plus a service charge of 2% per annum. The service charge of 2% shall be deducted from every loan release. Farmer-borrower under the program shall execute a promissory note in triplicate copies in favor of the Central Bank of the Philippines as administrator of the Consolidated SARF, the original of which shall be submitted to the Department of Rural Banks and Savings and Loan Associations (DRBSLA). f. The rural bank/ACA/PNB branch as agent of the Central Bank shall receive a commission of 3% on the amount collected for the fund in addition to the service charge of 2% per annum. g. The rural bank/ACA/PNB branch shall assume/absorb for its account 15% of losses arising from non-payment of loans granted under this program. h. In implementing the program, the following procedures shall be observed: (1) The qualified farmer-borrower shall file his loan application with the participating rural banks/ACA/PNB branch. (2) The rural bank/ACA/PNB branch shall submit to DRBSLA, Central Bank, its application for availment of special fund covering the applications of eligible farmer-borrowers. (3) The DRBSLA shall process the application and shall release to the rural bank/ACA/PNB branch through credit advice to the nearest PNB branch the amount approved from the Consolidated SARF. (4) The rural bank/ACA/PNB branch shall withdraw funds from the PNB branch and shall release loans to farmer-borrowers in accordance with this and existing supervised credit scheme guidelines, i.e., loans to farmer-borrowers shall be released in staggered amounts in accordance with the farm plan and budget jointly prepared by the farmer and the authorized technician. Every loan shall be covered by a separate promissory note and only one ledger card shall be maintained for each borrower with the proper notation therein as "Consolidated SARF". Such loan releases shall be made immediately upon receipt of the credit advice. The rural bank/ACA/PNB branch shall submit to DRBSLA Central Bank a list of farmers that were granted loans out of the said SARF within forty-five (45) days from the date of receipt of said fund. (5) Repayments received by the rural bank/ACA/PNB branch from farmer-borrower on loans granted under the program, including interest thereon less 3% commission on the amount collected, shall be remitted to the DRBSLA within five (5) banking days from receipt thereof. A rural bank/ACA/PNB branch that fails to remit the amount collected within the period mentioned above shall pay a penalty charge on the amount unremitted at the rate of fourteen per cent (14%) per annum until such amount is remitted in full to the Central Bank. i. Any amount received by the rural bank/ACA/PNB branch from the Central Bank shall be released to qualified farmer-borrowers within 15 days from receipt of the Consolidated SARF, and any unused portion thereof shall be returned to the DRBSLA, Central Bank within five (5) days after the 45-day period. A rural bank/ACA/PNB branch which fails to return such amount within this period shall pay interest on the amount not returned at the rate of 14% per annum until such amount is remitted in full to the Central Bank. Similarly, any unauthorized use of the Consolidated SARF by any rural bank/ACA/PNB branch shall subject such bank to the same interest on the amount involved at the rate of 14% per annum for the duration of such unauthorized use. j. Any misappropriation of funds received by the rural bank/ACA/PNB branch or failure of the rural bank/ACA/PNB branch to remit to the Central Bank loan repayments of farmer-borrowers of the amount from the Consolidated SARF not loaned out as provided in paragraph "i" above within the requisite period under this program shall subject the officers and employees responsible thereof to prosecution under Article 315 of the Revised Penal Code. k. The rural bank/ACA/PNB branch participating under this program shall keep separate books of account and records affecting transactions under the Consolidated SARF which shall be subject to inspection and examination of the Central Bank. Cash pertaining to this SARF shall, likewise, be physically segregated from other funds. Separate financial statements in the prescribed form shall be submitted monthly to the Central Bank by the participating rural banks/ACA/PNB branch. Accounting entries for these transactions shall be as prescribed. SECTION 1274. Lender of Last Resort Facility of the Central Bank . The following regulations shall govern the grant by the Central Bank of special credit accommodations to banks and non-bank financial intermediaries performing quasi-banking functions. SUBSECTION 1274.1 Nature of special credit accommodations . The Central Bank, as lender of last resort, may extend loans, advances, rediscounts and such other forms of credit accommodations to banks and non-bank financial intermediaries performing quasi-banking functions to provide them with liquidity in times of need. SUBSECTION 1274.2 Conditions to access . (1) The loans to directors, officers, stockholders and their related interests of the bank or non-bank financial intermediary performing quasi-banking functions applying for/seeking to avail itself of this special credit accommodation shall not exceed the prescribed aggregate or individual ceiling and the ceiling on unsecured loans and such loans shall all be in current status; and; 2) the loan portfolio arrearages in the bank or non-bank financial intermediary performing quasi-banking functions must not exceed one and a-half times the average of arrearages in the particular sector of the industry to which the financial intermediary belongs, as of the end of the quarter preceding the application for availment. SUBSECTION 1274.3 Terms of the credit a. Interest rate . The rate or interest chargeable on availment of such credit accommodation shall be an amount equivalent to a rediscount reference rate plus an additional rate. The rediscount reference rate shall be established by the Central Bank from time to time. In determining the rate, the Central Bank shall take into consideration the average effective yield rate charged or received by banks and non-bank financial intermediaries performing quasi-banking functions on the purchase of commercial paper without recourse. The additional rate to be imposed over and above the rediscount reference rate shall not be less than two (2) percentage points, with the applicable additional rate to be determined by the Central Bank on the basis of the prevailing monetary situation. The rediscount reference rate and the additional rate established for any given time shall be made public by the Central Bank and applied uniformly to all borrowers during that period. b. Security . Any paper, irrespective of maturity, eligible under Section 87 or Section 88 of Republic Act No. 265, as amended, shall be acceptable security for this credit facility. c. Loan values . The loan values of the paper offered as collateral shall be eighty per cent (80%) of the amount still due and outstanding on the paper offered as collateral. d. Repayment period . The term of the credit accommodation shall not exceed ninety (90) days. SUBSECTION 1274.4 Quota . Availment by any authorized financial intermediary under this facility shall not exceed ten per cent (10%) of its net worth, net of valuation reserves, as of the end of the quarter preceding the date of application. In the case of branches of foreign banks, the quota shall be ten per cent (10%) of the assigned capital as of the date of application. Additionally, an authorized financial intermediary or a branch of a foreign bank may avail itself of this facility to the extent equivalent to a further five per cent (5%) of its net worth, net of valuation reserves, as of the end of the quarter preceding the date of availment or assigned capital as the case may be. Any availment of this special credit facility shall fall within the unavailed basic rediscount ceiling of the authorized financial intermediary or the branch of a foreign bank as the case may be. SUBSECTION 1274.5 Interest rates and sanctions . Commercial Banks shall be governed by the following interest rates and sanctions on their overdrawing and emergency advances with the Central Bank: a. Commercial banks shall be assessed a minimum interest rate of 16% per annum, or the prevailing average interbank call loan rate, whichever is higher, plus 5% per annum, on their demand deposit accounts with the Central Bank; b. A bank with an overdrawn balance in its clearing account with the Central Bank which fails to cover such overdrawings not later than the next clearing day, shall be subject to the sanctions enumerated in Subsec. 1256.2; c. Emergency advances to banks shall be assessed an interest rate of 16% per annum, or the prevailing rediscount reference rate, whichever is higher, plus 3% per annum; d. An interest rate of 12% per annum shall apply to banks with approved rehabilitation programs; and e. Liquidated damages at the rate of 5% per annum shall be imposed over and above the governing interest rate for non-payment of such emergency loans at maturity. SECTION 1275. (Reserved) SECTION 1276. Repurchase Agreements with the Central Banks . Banks, investment houses and other non-bank financial institutions performing quasi-banking functions are allowed to enter into repurchase agreements with the Central Bank on their holdings of CBCIs and other government securities. SECTION 1277. Availment of Special Funds by the Philippine National Bank . The following guidelines for availing of special funds under the rehabilitation program for rice producing areas in Central Luzon are hereby issued: a. Application for Special Fund in the prescribed form shall be submitted by a rural bank or PNB branch qualified to participate as an agent of the Central Bank not later than December 31, 1978. A rural bank or PNB Branch to be qualified to participate shall submit a sworn written undertaking that it will restructure Phase XI loans of farmers affected by typhoons "Yaning", "Weling" and "Kading" over a period of two and one-half (2-) years for irrigated areas and three (3) years for rainfed areas; b. The application shall be supported by a list of farmers in the prescribed form, approved by the rural bank or PNB branch. The farmers shall meet the following requirements: 1) He must be included in the master list of farmers affected by typhoons "Yaning, Weling and Kading" to be submitted by the Ministry of Agriculture to the Central Bank irrespective of whether or not he participated in Phase XI of the Masagana 99 Program. 2) He must be included in the list of farmers to be submitted by the National Irrigation Administration (NIA), Farm Systems Development Corporation (FSDC) and/or the Ministry of Agriculture indicating that farmlands being cultivated by them are serviced by NIA or are otherwise adequately irrigated and ready for immediate replanting. c. The maximum amount of loan that may be granted under this program shall not exceed P1,200 per hectare. The proceeds of the loan shall be used exclusively to finance the replanting of early maturing seed varieties in irrigated rice lands. d. Loans granted under the program shall be for a period not exceeding 120 days at an interest rate of 10% per annum plus a service charge of 2% per annum. Farmer-borrowers under the program shall execute a promissory note in triplicate copies in favor of the Central Bank of the Philippines as an Administrator of the Special Fund, the original of which shall be submitted to the Department of Rural Banks and Savings and Loan Associations. e. The rural bank or PNB as agent of the Central Bank shall receive a commission of 3% on the amount collected for the fund in addition to the service charge of 2% per annum. An Agency Agreement shall be entered into between the Central Bank and the participating rural bank or PNB. f. The rural bank or PNB branch shall assume/absorb for its own account 15% of losses arising from nonpayment of loans granted under this program. g. The rural bank or PNB branch shall consolidate the past due loans of its farmer-borrowers under Phase XI of M-99 program including accrued interest thereon. Such consolidated loans which were rediscounted with the Central Bank shall be restructured within sixty (60) days from the date of effectivity of the Agency Agreement. The Central Bank as well as the rural bank or the PNB branch shall not charge interest on the restructured loans within the term of the restructured loans. However, should these loans remain unpaid after the maturity of the restructured loans, the same shall be charged interest at the original rate until they are paid. h. In implementing the program, the following procedures shall be observed; 1) The qualified farmer-borrowers shall submit their loan application with the participating rural banks or PNB branch. 2) The rural bank or PNB branch shall submit to the DRBSLA, Central Bank, its application for availment of Special Funds covering the list of recommended applications of farmer-borrowers. Only applications of farmers whose names are included in the list furnished by the Ministry of Agriculture shall be considered for a loan. 3) The DRBSLA, Central Bank, shall process the application and shall release to the rural bank or PNB branch through credit advice to the nearest PNB branch concerned the necessary amount from the Special Fund. 4) The rural bank shall withdraw funds from the PNB branch and shall release loans to farmer-borrowers in accordance with this and existing M-99 guidelines. Such loan releases shall be made immediately from the date of receipt of the credit advice. 5) Repayments received by the rural bank or the PNB; branch from borrowers on loans granted under this program, including interest thereon less 3% commission on the amount collected, shall be remitted to the DRBSLA, Central Bank, within five (5) banking days from receipt thereof. i. Any amount received by the rural bank or PNB branch from the Central Bank as Administrator of the Special Fund not loaned out or otherwise committed to qualified farmers shall be remitted to the DRBSLA, Central Bank, within thirty (30) days from receipt of the credit advice but in no case shall the remittance be made later than January 31, 1979. j. Any misappropriation of funds received by the rural bank or the PNB branch or failure of the rural bank or PNB branch to remit to the Central Bank loan repayments of farmer-borrowers of the amount from the Special Fund not loaned out as provided in Item i above within the requisite period under this program shall subject the officers and employees responsible therefor to prosecution under Article 315 of the Revised Penal Code. k. A rural bank which fails to restructure its M-99 loans (Phase XI) within the prescribed period of sixty (60) days from date of effectivity of the Agency Agreement notwithstanding its sworn undertaking to do so shall, after due hearing, subject the officers of the rural bank who signed the sworn undertaking to the sanctions provided for under Section 34-A of Republic Act No. 265, as amended. l. Separate books of accounts and records affecting transactions under this Special Fund shall be kept by the rural bank or PNB branch participating under this program. Cash pertaining to this Fund shall likewise, be physically segregated from other funds. Separate financial statements in the existing prescribed form shall be submitted monthly to the Central Bank by the participating rural bank concerned. Uniform accounting entries shall be made in accordance with the prescribed rules. SECTION 1278. Records and Reports . The bank's liability for the discounted and/or rediscounted papers "with recourse" with the Central Bank and/or other financial intermediaries shall be recorded and shown as "Bills Payable" in all reports submitted to the Central Bank. The loans and discounts, bills purchased, acceptances and other accounts affected by such discounting and/or rediscounting transactions with the Central Bank shall remain as part of the bank's loan portfolio. A footnote in the financial statement shall indicate the outstanding balances of the discounted and/or rediscounted loans. cdlex SECTION 1279. Special Credit Facility to Banks for CP-Committed Credit Lines Granted . The following guidelines shall govern the grant by the Central Bank of special credit accommodations to banks which establish committed credit line in favor of corporations proposing to issue commercial paper. SUBSECTION 1279.1 Nature of special credit accommodations . The Central Bank may extend a loan to any bank which on its own or as a member of a group of banks, provides a committed credit line facility to a corporation proposing to issue commercial paper. SUBSECTION 1279.2 Conditions to access . A bank applying for a loan pursuant to the provisions of this section shall submit to the Central Bank documents showing that it has extended a committed credit line to a commercial paper issuer and that such issuer has availed itself of said credit line. SUBSECTION 1279.3 Terms of the credit a. Interest rate . The rate of interest chargeable on the availment of this credit facility shall be that which is equivalent to 80% of the total of interest and fees received by the bank from the issuer, net of provision for gross receipts tax paid by the bank on such income. b. Security . The promissory note executed by the commercial paper issuer in favor of the bank for the amount drawn against the committed credit line shall be the security for this credit facility. c. Loan values . The loan value of paper offered as collateral shall be 80% of the amount still due and outstanding on the paper offered as collateral. d. Repayment period . The term of the credit accommodation may not exceed 90 days and shall be non-renewable. SUBSECTION 1279.4 Ceiling . If availment of this credit facility is outside the other rediscount ceiling of the bank, it shall be limited to the extent of 15% of the net worth of the bank. SECTION 1280. Availments from the KKK Trust Fund With the Central Bank . Pursuant to the Memorandum of Agreement entered into by and among the Ministry of Human Settlements as Secretariat of the Kilusang Kabuhayan at Kaunlaran (KKK), the Central Bank of the Philippines (CBP), the Philippine National Bank (PNB), Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP), the following guidelines shall govern the utilization by the PNB, LBP and the DBP of the funds being administered by the Central Bank to finance viable projects under the Kilusang Kabuhayan at Kaunlaran (KKK) livelihood program: SUBSECTION 1280.1 Releases from the Trust Fund a. The KKK Secretariat will provide the Central Bank (CB) with a list of designated banks through which the loan funds will be channelled. b. The CB thru its Department of Loans and Credit (DLC), shall release, upon advice (supported by KKK resolution and corresponding project details) from the KKK National Secretariat, the funds to KKK-designated banks (Fundholders) in the form of Special Time Deposit (STD) against the Fundholders' Certificate of Time Deposits (CTDs) for an initial period of ninety (90) days, with interest at 3% per annum. The STD shall be exempt from the reserve requirements on deposit liabilities, as an exception to Sec. 1253. c. The CB shall debit the demand deposit account of the Fundholders for the three (3%) percent p.a. interest on STD computed from date the fund is released to the Fundholders up to the date immediately preceding the commitment of the fund to the project proponents (borrowers). The interest on the STD proceeds upon commitment of the fund shall be computed and collected in the manner provided under Subsec. 1280.5 of these guidelines. d. Ninety (90) days after the receipt of the proceeds of STD the Fundholders shall submit to the CB a report on the commitments against such particular STD, in the prescribed form and any portion of the STD which has not been committed at such time shall be returned immediately by the Fundholders to the CB and applied as partial payment on such STD. SUBSECTION 1280.2 Fund releases by Fundholders a. Upon receipt by the Fundholders of the Project Loan Approval Docket covering duly approved loans and endorsed by the KKK Regional Secretariat, the corresponding amount of STD shall be deemed committed and the Fundholders will release, not later than five (5) banking days, the initial amount of the loan to the borrowers. A report in the prescribed form of such loan releases made by the Fundholder during a week shall be submitted to the DLC of CB not later than Tuesday of the following week. b. Subsequent loan releases will be made per KKK Endorsement/Loan Action Sheet's Release Schedule in accordance with the Funds Release, Collection and Monitoring System and Procedures as approved by the KKK Secretariat. c. Upon a finding by the KKK National Secretariat of non-release of loan installments/availments within five (5) banking days from receipt of loan approval from the KKK National Secretariat/Regional Action Officer, or of non-remittance of collections of the loan within sixty (60) banking days by the Fundholders, and that such non-release or non-remittance was not caused by fortuitous events as defined under the new Civil Code, the CB, upon proper advice by the KKK National Secretariat, shall withdraw/reduce the uncommitted funds from the STDs with said Fundholders. SUBSECTION 1280.3 Substitution of Certificate of Time Deposit (CTD) . The Fundholders, upon maturity of a particular 90-day CTD, shall submit a new CTD on the amount committed to project proponents at the same interest rate and with maturity coterminous with the latest maturing loan as per report submitted as provided under Item d of Subsec. 1280.1. SUBSECTION 1280.4 Interest . Loans extended by Fundholders to borrowers shall be charged an interest of 12% per annum, inclusive of service and other charges. SUBSECTION 1280.5 Loan repayments . The loan repayments (amortization/installment payments) received from borrowers shall, within sixty (60) banking days from receipt thereof by the Fundholder, be remitted to the CB by said Fundholder, together with the 3% p.a. interest on STD computed from the date of commitment of the Fund to the date of actual remittance to the KKK Trust Fund with the CB, by way of payment on the STD principal and interest, but the covering Certificate of Time Deposit (CTD) shall be returned by CBP to the Fundholder concerned only upon full liquidation of the CTD. SUBSECTION 1280.6 Guarantee coverage . Loans granted to eligible borrowers and "puhunan" releases under the KKK financing program as approved by the KKK Secretariat shall be fully covered by guarantee under a guarantee and repayment system and procedures approved by the KKK, CB and participating banks. The guarantee shall be equivalent to the uncollected principal balance, plus 2% per annum thereon (net of 3% due to the CB on applicable STD) as fundholders' handling fee. J. DEPOSIT SUBSTITUTE OPERATIONS (QUASI-BANKING FUNCTIONS) SECTION 1281. Deposit Substitute Instruments Any deposit substitute transaction by a bank performing quasi-banking functions shall be limited to its own promissory notes, repurchase agreements, and certificates of assignment/participation with recourse. SUBSECTION 1281.1 Prohibition against use of acceptances, bills of exchange and trust certificates . Acceptances, bills of exchange, and trust certificates shall not be used by financial intermediaries, banks and non-banks, as evidence of deposit substitute liabilities in connection with their quasi-banking functions. This prohibition shall not apply to the acceptance or negotiation of bills of exchange in connection with trade transactions, or to the issuance of trust certificates creating trust relationships. SUBSECTION 1281.2 Negotiation of promissory notes . Negotiate promissory notes acquired by banks and non-banks in connection with their quasi-banking functions, shall not be negotiated by mere indorsement and/or delivery, if they do not conform with the minimum features prescribed under Subsec. 1281.3. If these notes do not contain the features, their negotiation shall be covered by any of the appropriate deposit substitute instruments above-mentioned. SUBSECTION 1281.3 Minimum features of deposit substitute instruments . Deposit substitute instruments issued by entities performing quasi-banking functions shall have the following minimum features: a. The present value and maturity value and/or the principal amount and interest rate and such other information as may be necessary to enable the parties to determine the cost or yield of the borrowing or placement shall be specified. b. The date of issuance shall be indicated at the upper right corner of the instrument, and directly below which shall be the maturity period or the word "demand", if it is a demand instrument. c. The payee may be identified by his trust account/deposit account number in both negotiable and non-negotiable instruments. d. Securities which are the subject of a repurchase agreement or a certificate of assignment/participation with recourse, shall be particularly described on the face of said instruments or on a separate instrument attached and specifically referred to therein and made an integral part thereof as to the maker, value, maturity, serial number, and such other particulars as shall clearly identify the securities. e. The instrument shall provide for the payment of liquidated damages, in addition to stipulated interest, in case of default by the maker or issuer, as well as attorney's fees and costs of collection in case of suit. f. A conspicuous notice at the lower center margin of the face of the instrument that the transaction is not insured by the Philippine Deposit Insurance Corporation shall be indicated. g. The corporate name of the issuer shall be printed at the upper center margin of the instrument and directly below which shall be a designation of the instrument, such as "Promissory Note" or "Repurchase Agreement". h. The words "duly authorized officer'' shall be placed directly below the signature of the person signing for the maker or issuer. i. Each instrument shall be serially prenumbered. j. The copy delivered to the payee shall bear the word "Original" and the copies retained by the issuer shall be identified as "Duplicate", "File Copy" or words of similar import. k. Only security paper with adequate safeguards against alteration or falsification shall be used. Borrowings of banks and non-bank financial intermediaries performing quasi-banking functions from the loans and discounts window of either banks or non-bank financial intermediaries shall be exempted from the documentation requirements prescribed in this subsection: Provided , That the exemption from the documentation requirements prescribed in this section shall not be construed or interpreted as exempting said borrowings from other regulations standardizing deposit substitute instruments and from other Central Bank regulations on deposit substitutes. SUBSECTION 1281.4 Prescribed instruments . Deposit substitute instruments shall conform to the language to be prescribed by the Central Bank. Any substantial deviation therefrom or any additional stipulation therein shall be referred to the Central Bank for prior approval. The size and appearance of these instruments should not be similar to the size and appearance of checks. [Shown in Appendix 17 are the samples of standardized instruments as evidence of deposit substitute liabilities.] Financial intermediaries performing quasi-banking functions are therefore advised to issue only deposit substitute instruments which conform with the prescribed provisions, said entities are further advised that rubber stamping, type-writing or handwriting some provisions shall not be considered compliance with said regulations. SUBSECTION 1281.5 Physical delivery of securities . Securities, warehouse receipts, quedans and other documents of title which are the subject of quasi-banking functions shall be physically delivered to the lender/purchaser together with the principal/overlying borrowing instrument, or to a custodian bank as signified in writing by the lender/purchaser: Provided , That the custodian bank is not related directly or indirectly to the borrowing/selling entity: Provided, further , That a bank engaged in quasi-banking functions may not be allowed custodianship functions for securities issued or owned by the same, or securities in bearer form. The delivery shall be effected upon payment and shall be evidenced by a securities delivery receipt duly signed by authorized officer/s of the entity performing quasi-banking functions and the lender/purchaser, or by the custodian bank. The principal borrowing instrument without underlying securities, warehouse receipts, quedans, or other documents of title shall likewise be physically delivered to the lender/purchaser. SUBSECTION 1281.6 Other rules and regulations governing the issuance and treatment of deposit substitute instruments a. If there is any stipulation that payment of the deposit substitute shall be chargeable against a particular deposit account, it shall further provide that the liability of the maker or issuer of the instrument shall not be limited to the outstanding balance of said account. b. Any agreement allowing the issuer or maker to substitute the underlying securities shall further provide that the actual substitution shall be with the prior written consent of the payee. c. Automatic renewal upon maturity of the instrument may be effected only under terms and conditions previously stipulated by the parties. d. Stipulations between the maker or issuer and the payee which are embodied in separate instruments shall be specifically referred to in the deposit substitute and made an integral part thereof. e. In the case of repurchase agreements and certificates of assignment/participation with recourse, the stipulation shall clearly state either (1) that the underlying securities are being delivered to the buyer or assignee as collaterals or (2) that the ownership thereof is being transferred to the buyer or assignee. SECTION 1282. Maturity ; Matured and Unclaimed Deposit Substitutes . The minimum term of any single deposit substitute transaction shall be fifteen (15) days: Provided, however , That interbank borrowing shall not be subject to this limitation. Banks firming quasi-banking functions shall continue to hold matured and unclaimed liabilities as deposit substitutes subject to reserves: Provided , That an unclaimed matured deposit substitute instrument shall be payable on demand and shall earn an interest or yield from maturity to actual withdrawal or renewal at a rate applicable to a deposit substitute with a maturity of fifteen (15) days. SECTION 1283. Reserve Requirements All banking institutions, including banks with expanded commercial banking authority, authorized to engage in quasi-banking functions shall maintain a twenty three percent (23%) reserve effective Oct. 3, 1985 against deposit substitute liabilities as defined in Section 100-A of R.A. No. 265, as amended, with original maturities of 730 days or less, except short-term borrowings from banks and non-bank financial institutions authorized to engage in quasi-banking functions as defined in Sec. 1343 for which the reserve requirement shall be one percent (1%): Provided, however , That said short-term borrowings shall be covered by promissory notes which are non-negotiable, non-transferable/non-assignable, not subject of repurchase agreements nor of certificates of participation/assignment with recourse, and shall be duly stamped as such by the bank or non-bank financial institution authorized to engage in quasi-banking functions concerned. ( Effective Oct . 3, 1985 ). Note : Amendments of Section 1283 as provided by the following CBP Circulars: 1) Section 2 of CBP Circular 1104 dated May 26, 1986; 2) Section 2 of CBP Circular 1112 dated August 4, 1986; 3) Section 1 of CBP Circular 1119 dated October 10, 1986; 4) Section 2 of CBP Circular 1122 dated November 28, 1986; 5) Section 2 of CBP Circular 1190 dated November 10, 1988; 6) Section 2 of CBP Circular 1204 dated June 23, 1989; 7) Section 2 of CBP Circular 1207 dated August 4, 1989; 8) Sections 2 and 3 of CBP Circular 1209 dated September 1, 1989; 9) Section 2 and 3 of CBP Circular 1233 dated March 21, 1990; 10) Section 2 of CBP Circular 1261 dated November 9, 1990; 11) Section 2 of CBP Circular 1269 dated December 26, 1990; 12) CBP Circular 1377 dated January 21, 1993 and; 13) Section 2 of CBP Circular 1395 dated July 5, 1993 Effective April 25, 1984 the reserve requirement on deposit substitute liabilities with original maturities of more than seven hundred thirty (730) days shall be six per cent (6%). SUBSECTION 1283.1 Composition of reserves . "The composition of the reserves shall be (a) at least twenty five percent (25%) in the form of deposit balances with the Central Bank, and (b) the remaining seventy-five percent (75%) in the form of cash in vaults and/or evidences of indebtedness or obligations of the government, its political subdivisions or instrumentalities. The holdings of such securities as reserves shall be subject to the same rules and regulations as those prescribed in the last paragraph of Sec. 1254.b. ( Effective Feb . 18, 1985 ). For purposes of this subsection, government securities which may form part of the reserves against deposit substitute liabilities of banks shall refer to bonds or other evidences of indebtedness representing direct obligations of the Government of the Republic of the Philippines: Provided , That such securities shall have the following minimum features/conditions: a. The securities must bear an interest rate of not more than four per cent (4%) per annum, must be non-negotiable and shall carry Central Bank support; and b. The amount, maturity date and rate of interest must be definite and stated in the certificate itself. Premyo Savings Bonds (Regular and Biglang Bahay Series) shall continue to be eligible as reserves of banks against deposit substitute liabilities in accordance with the following schedule: Percent of Reserve Reserve Requirement Ceiling on Gov't. Securities January 1, 1984-June 30, 1984 37.5 50 July 1, 1984-June 30, 1986 18.75 25 Effective July 1, 1986, said bonds shall no longer be eligible as reserves. ( Effective Jan . 13, 1984 ). Other government securities being used for reserve purposes shall continue to be eligible as such: Provided , That whenever said securities shall have matured, they shall be replaced by securities carrying the above features. The required reserves against marginal deposits shall first be satisfied before any of the available reserves can be utilized in complying with the reserves on deposit/deposit substitute liabilities. Only the buying/lending bank in a resale agreement covering eligible government securities may use such securities as reserves against deposit substitute liabilities. Conversely, the selling/borrowing bank on a repurchase agreement covering eligible government securities may not use such securities as reserves against deposit substitute liabilities. SUBSECTION 1283.2 Computation of reserve position . The provisions of Sec. 1255 on the computation of reserve position for deposit liabilities shall also govern the computation of reserve position for deposit substitute liabilities. dctai SUBSECTION 1283.3 Reserve deficiencies . The provision of Sec. 1256 on reserve deficiencies of deposit liabilities shall also govern the computation of reserve deficiencies for deposit substitute liabilities. SUBSECTION 1283.4 Chronic reserve deficiency ; penalties . The provisions of Subsec. 1256.1 on chronic reserve deficiency for deposit liabilities and penalties therefor shall govern this subsection. SUBSECTION 1283.5 Report of compliance . The provisions of Sec. 1257 on the submission of a weekly report to the Central Bank of the daily required and available reserves shall govern this subsection. SECTION 1284. Minimum Trading Lot . The minimum size of any single deposit substitute transaction by a bank performing quasi-banking functions shall be P50,000, irrespective of maturity. No bank performing quasi-banking functions shall issue deposit substitute instruments in the name of two or more persons or accounts. For purposes of this section, the following shall be considered as one person or account: a) husband and wife and (b) "in trust for" (ITF) arrangements. (As amended by Section 1 of CBP Circular 1341 dated May 25, 1992) SECTION 1285. Yield/Interest Rates . Deposit substitutes of banks performing quasi-banking functions shall not be subject to yield or interest rate ceilings. SUBSECTION 1285.1 Interest in kind . Banks performing quasi-banking functions shall not pay interest in kind on deposit substitutes. SUBSECTION 1285.2 Time and payment of interest . Interest or yield on deposit substitutes may be paid at maturity or in advance: Provided, however , That interest or yield paid in advance shall not exceed the interest for one year. SUBSECTION 1285.3 Interest/yield on preterminated deposit substitutes . The interest or yield of a deposit substitute terminated before the maturity date fixed in the instrument shall be as follows: a. Any deposit substitute terminated within the first half of its maturity period shall be paid an interest or a yield rate equivalent to twenty-five per cent (25%) of the interest stipulated in the contract; b. Any deposit substitute terminated within the second half of its maturity period shall be paid an interest or a yield rate equivalent to fifty per cent (50%) of the interest stipulated in the contract; c. The provisions of this subsection shall not apply in the case of deposit substitutes with maturities of more than 730 days which are preterminated more than 730 days after the date of placement. Provided, however , That if the interest or yield has been paid in advance, the corresponding rebate shall be charged against the principal of the deposit substitute. SECTION 1286. (Reserved) SECTION 1287. Money Market Placements of Rural Banks . All banks and non-bank financial intermediaries performing quasi-banking functions shall not accept money market placements of rural banks unless the latter present a certification under oath stating (a) that they do not have overdue special time deposits; (b) that they have no past due obligations with the Central Bank or other government financial entities; (c) the amount of their current obligations, if any, with said government financial entities; and (d) the amount of their total outstanding money market placements. However, in no case shall such financial intermediaries sell receivables to rural banks without recourse. SUBSECTION 1287.1 Definition of terms . As used in Sec. 1287, the following terms shall have the following meanings: a. Money market placements shall include investments in debt instruments, including purchase of receivables with recourse to the lending institution, except purchase of government securities on an outright basis. b. Government securities shall include evidences of indebtedness of the Republic of the Philippines, the Central Bank of the Philippines and other evidences of indebtedness or obligations of government entities the servicing and repayment of which are fully guaranteed by the Republic of the Philippines. c. Persistent violation shall mean the violation of any of the provisions of these rules by the director or officer concerned for four or more times within a 12-month period from the date the first offense was committed. SUBSECTION 1281.2 Conditions required on accepted placements . Placements accepted which are otherwise not covered by the above prohibition must comply with the following conditions: a. that total money market placements of a rural bank stated in the certification, including the placement being accepted by the entity concerned, shall not exceed the rural bank's combined unimpaired capital accounts or networth less current obligations with the Central Bank or other government financial entities; b. the maturity of the money market placement shall not exceed sixty (60) days; and c. that placements shall be evidenced in all cases by promissory notes of accepting entities/repurchase agreements and/or certificates of participation/assignment with recourse and that underlying instruments shall be Central Bank Certificates of Indebtedness or Other government securities the servicing and repayment of which are guaranteed by the Republic of the Philippines. SUBSECTION 1287.3 Sanctions . Violation of the provisions of this section shall be a ground for suspensor or after due hearing, removal from office of the directors/officers of banking institutions responsible therefor. For purposes of this section the penalty of suspension and removal from office shall be imposed as follows: 1) 1st offense suspension between 15 days to one month 2) 2nd offense suspension between one to three months 3) 3rd offense suspension between four to six months 4) Persistent violation removal from office Persistent violation for purposes of this subsection shall mean the violation of any of the provisions of Sec. 1287 by the director or officer concerned for four or more times within a 12-month period from the date the first offense was committed. Any bank or non-bank financial intermediary performing quasi-banking functions found violating or not complying with the provisions hereof may be penalized by a suspension or revocation of the authority to engage in quasi-banking functions. SUBSECTION 1287.4 Reporting requirements . The monthly sworn statement of quasi-banking operations for banks and non-banks shall henceforth include a certification to the effect that the entity has not accepted money market placements as herein defined from rural banks covered by the prohibition and that said money market placements comply with the conditions prescribed in Subsec. 1287.2 above. SECTION 1288. Transactions with Controlled Corporations . A corporation performing quasi-banking functions shall not relend to, or purchase receivables or other obligations of other corporations majority of the voting stock of which is owned by subject corporation, unless the terms of the transactions are not more favorable than those of other similar transactions. SECTION 1289. Sundry Provisions on Quasi-Banking Functions . The following rules and regulations shall govern the quasi-banking operations of commercial banks and banks with expanded commercial banking authority. SUBSECTION 1289.1 Elements of quasi-banking . The essential elements of quasi-banking are: a. Borrowing funds for the borrower's own account; b. Twenty or more lenders at any one time; c. Methods of borrowing are issuance, endorsement, or acceptance of debt instruments of any kind, other than deposits, such as acceptances, promissory notes, participations, certificates of assignment or similar instruments with recourse, trust certificates, repurchase agreements, and such other instruments as the Monetary Board may determine; and d. Purpose which may be for (1) relending, or (2) purchasing receivables or other obligations. SUBSECTION 1289.2 Definition of terms and phrases . The following terms and phrases shall be understood as follows: a. Borrowing shall refer to all forms of obtaining or raising funds through any of the methods and for any of the purpose provided in Subsec. 1289.1 whether the borrower's liability thereby is treated as real or contingent. b. For the borrowers own account shall refer to the assumption of liability in one's own capacity and not in representation, or as an agent or trustee, of another. c. Purchasing of receivables or other obligations shall refer to the acquisition of claims collectible in money, including interbank borrowings or borrowings between financial institutions, or of securities, of any amount and maturity, from domestic or foreign sources. d. Relending shall refer to the extension of loans by an institution with antecedent borrowing transactions. Relending shall be presumed, in the absence of express stipulation, when the institution is regularly engaged in lending. e. Regularly engaged in lending shall refer to the practice of extending loans, advances, discounts or rediscounts as a matter of business; continuous or consistent lending as distinguished from isolated lending transactions. SUBSECTION 1289.3 Transactions not considered quasi-banking . The following shall not constitute quasi-banking functions: a. Borrowing by commercial, industrial and other non-financial companies through any of the means listed in Subsec. 1289.1 hereof, for the limited purpose of financing their own needs or the needs of their agents or dealers; and b. The mere buying and selling without recourse of instruments mentioned in Subsec. 1289.1: Provided that: 1) The institution buying and selling without recourse shall indicate in conspicuous print on its instrument the phrase "without recourse", "sans recourse" or any combination of words of similar import that will convey the absence of liability or guarantee of liability by said institution; and 2) In the absence of the phrase "without recourse", "sans recourse" or words of similar import, the instrument so issued, endorsed or accepted, shall automatically be considered as falling within the purview of these regulations. (As amended by CBP Circular 1234 dated April 6, 1990) SUBSECTION 1289.4 Pre-conditions for the exercise of quasi-banking functions . Only banks and non-banks authorized to engage in quasi-banking functions may undertake or perform quasi-banking functions as defined in Subsec. 1289.1: Provided , That the following pre-conditions are complied with: a. a minimum paid-in capital of P50 million; b. at least a majority of the voting stock shall be owned by citizens of the Philippines; c. at least a majority of the members of the Board of Directors shall be citizens of the Philippines; d. that the managerial staff possess the integrity, experience and expertise which provide reasonable assurance that the enterprise is being conducted with financial prudence. SUBSECTION 1289.5 Certificate of Authority from the Central Bank . Banks and non-banks possessing the qualifications in Subsec. 1289.4 and desiring to engage in quasi-banking functions shall first obtain a Certificate of Authority from the Central Bank of the Philippines by filing: a. An Information Sheet; b. Individual bio-data of directors and members of the managerial staff, signed by them under oath; and c. a borrowing-investment program for one year, which should include at the minimum, planned distribution of portfolio as to 1) underwriting (for investment houses); 2) commercial paper markets; 3) stocks and bonds; 4) government securities; 5) receivables financing discounting and factoring; 6) leasing 7) direct loans; and expected; sources of funds to support investment program classified as to 1) maturity; short, medium and long-term; 2) interest rates; and 3) domestic or foreign sources whether institutional or personal. SUBSECTION 1289.6 Issuance of Commercial Paper . The issuance of commercial paper by all banks shall be in compliance with the applicable provisions of the SEC rules on registration of commercial papers appended hereto as Appendices 18 and 19. No commercial paper shall be issued in the name of two or more persons or accounts as defined under existing rules of the Central Bank. ( Effective April 29, 1985 ). SECTION 1290. Without Recourse Transactions SUBSECTION 12901. Prohibited practices a. Any of the following practices or practices similar and/or tantamount thereto in connection with or without recourse transaction is hereby prohibited and existence of any shall render the financial intermediary and its directors/officers/employees responsible therefor to sanctions provided in Item b below: 1) Issuance of postdated checks of the financial intermediary, whether for its own account or as an agent of the debt instrument issuer, in payment of the debt instrument, sold, assigned or transferred without recourse; or 2) Issuance by the financial intermediary of any form of guaranty on sale transactions or on negotiations or assignment of debt instruments without recourse; and 3) Payment with its own funds by the financial intermediary which assigned, sold or transferred the debt instrument without recourse, unless the financial intermediary can show that the issuer has with the said financial intermediary funds corresponding to the amount of the obligation. b. Any financial intermediary as well as directors/officers/employees thereof, which engages in any or similar practices referred to in Item a above shall be subject to the sanctions provided in Sections 34-A and 34-B of Republic Act No. 265, as amended, without prejudice to the provisions of Section 34 of the same Act. K. OTHER BORROWINGS SECTION 1291. Borrowings from the Government . Except as may be authorized by existing Statutes, no private bank or non-bank financial intermediary shall, whether or not performing quasi-banking functions, borrow any fund or money from the Government and government entities, through the issuance or sale of its acceptances notes or other evidences of debt. Note : Amendments of Section 1291 as provided by the following CBP Circulars: 1) CBP Circular 1153 dated September 3, 1987 and; 2) CBP Circular 1242 dated June 20, 1990 SECTION 1292. Borrowings from Trust Departments or Investment Houses . Funds borrowed by banks or non-bank financial intermediaries performing quasi-banking functions from trust departments or managed funds of banks or investment houses are not considered as interbank borrowings and, therefor, are subject to the: a. reserve requirement on deposit substitutes; b. minimum 15-day maturity period; c. minimum trading lot rule; and d. 20% final withholding tax on deposit substitutes. SECTION 1293. (Deleted by Circular No. 1059) SUBSECTION 1293.1 (Deleted by Circular No. 1059) SUBSECTION 1293.2 (Deleted by Circular No. 1059) SUBSECTION 1293.3 (Deleted by Circular No. 1059) SECTIONS 1294 - 1296. (Reserved) SECTION 1297. Issuance of Bonds . The following guidelines shall govern the issuance of bonds by banks with expanded commercial banking authority and commercial banks. SUBSECTION 1297.1 Definition of terms . For purposes of this section, unless the context clearly indicates otherwise, the following shall have the meaning as indicated. a. "Government securities" shall refer to evidences of indebtedness of the Republic of the Philippines or its instrumentalities, or of the Central Bank, and must be freely negotiable and regularly serviced. b. "Net book value" shall refer to the acquisition cost of property or accounts plus additions and improvements thereon less valuation reserves, if any. c. "Current market value" shall refer to the value of the property as established by a duly licensed independent appraiser. d. "Affiliate" shall refer to a concern linked directly or indirectly to another by means of: 1) Ownership, control and power to vote, of ten per cent (10%) or more of the outstanding voting securities. 2) Interlocking directorship/officership. 3) Common major stockholders: i.e., owning ten per cent (10%) or more of the outstanding voting securities. 4) Management contract or any arrangement granting power to direct or cause the direction of management and policies. 5) Voting trustee holding ten per cent (10%) or more of the outstanding voting securities. 6) Permanent proxy constituting ten per cent (10%) or more of the outstanding voting securities. e. "Subsidiary" shall refer to a company fifty per cent (50%) or more of the outstanding voting securities of which are directly or indirectly owned, controlled, or held with power to vote, by another. SUBSECTION 1297.2 Compliance with SEC rules on registrants of bond issues . All banks with expanded commercial banking authority and commercial banks issuing or intending to issue bonds shall comply with the Rules on Registration of Long-Term Commercial Papers and Bonds promulgated by the Securities and Exchange Commission (SEC), as approved by the Monetary Board (Appendix 19). SUBSECTION 1297.3 Notice to Central Bank . Within three (3) days from approval by SEC of its bond issue, the bank concerned shall notify the Department of Commercial and Savings Banks of the Central Bank of the approval, attaching thereto the documents required by the SEC for the creation and registration of the bond issue. cdlex SUBSECTION 1297.4 Minimum features . Bonds issued by banks with expanded commercial banking authority and commercial banks shall have the following minimum features: a. Form ; issue price ; denomination . The trust indenture and the name of the indenture trustee shall be indicated on the face of the bond certificate. The SEC assigned bond registration number and expiry date, if any, shall likewise be indicated, stamped on the face of each bond certificate issued. Bonds may be issued at face value, at a discount or a premium. Minimum denomination shall be P20,000.00. b. Term . The minimum term of the bonds shall be four (4) years. No optional redemption before the fourth year shall be allowed. c. Interest ; manner ; form of payment . The bonds shall not be subject to interest rate ceilings prescribed by the Monetary Board or Republic Act No. 2655, as amended. d. Trust indenture ; collaterals ; sinking fund . A trust indenture shall be executed between the issuer and a qualified trust corporation as trustee, which shall neither be an affiliate nor a subsidiary of the issuer. The following shall be deemed as eligible collateral and shall be maintained at respective values indicated in relation to the face value of the bond issue: 1) Government securities Aggregate current market value of 100% 2) Readily marketable Aggregate current market value private securities listed of 15% in the big board of stock exchanges 3) Real estate Net book value of 100% 4) Unmatured receivables Net book value of 150% acquired with recourse 5) Unmatured receivables Net book value of 200% acquired without recourse Government and private securities, certificates of title and documents evidencing receivables offered as security shall be physically delivered to the indenture trustee. Substitution of collaterals shall be allowed provided that in no case should the collateral fall below the herein required ratios. The issuer may, at his option, provide for the retirement at maturity of the bond issue through a sinking fund to be deposited with and managed by the indenture trustee. e. Bond registry . The bonds shall be fully registered as to principal and interest. The issuer, its trustee, agent or underwriter, must maintain a bond registry duly approved by the SEC for recording initial and subsequent transfers the names of transferees, date of transfer, purchase price and serial numbers of bonds transferred. SUBSECTION 1297.5 Reserve requirements . Effective January 1, 1982, a one per cent (1%) reserve shall be maintained against all bond issues including outstanding amounts as of said date, which shall be increased at the rate of one percentage point every semester thereafter until the five per cent (5%) reserve requirement shall have been reached. The form/composition of reserves for bond issues shall be in accordance with the applicable rules on reserves against deposit substitute liabilities and borrowings. SUBSECTION 1297.6 Applicability of certain regulations . The provisions of Secs. 1288 and 1289 insofar as they are applicable and not inconsistent herewith, shall be suppletory hereto. SECTION 1298. (Reserved) SECTION 1299. General Provision on Sanctions . Unless otherwise provided for, any violation of the provisions of this Part shall be subject to the provisions of Sections 34 and 34-A of Republic Act No. 265, as amended. * Copied verbatim from documents obtained directly from the Bangko Sentral ng Pilipinas PART THREE Loans, Investments and Special Financing Programs A. LOANS IN GENERAL SECTION 1301. Loan Limit to a Single Borrower . Except as the Monetary Board may otherwise prescribe, the total liabilities of any person, company, corporation or firm, to a commercial banking corporation for money borrowed, excluding (a) loans secured by obligations of the Central Bank or of the Philippine government; (b) loans fully guaranteed by the government as to the payment of principal and interest; (c) loans to the extent covered by hold-out on or assignment of, deposits maintained in the lending bank and held in the Philippines; (d) loans and acceptances under letters of credit to the extent covered by margin deposits; and (e) other loans or credits which the Monetary Board may, from time to time specify as non-risk assets, shall at no time exceed fifteen per cent (15%) of the unimpaired capital and surplus of such bank. The total liabilities of any borrower may amount to a further fifteen per cent (15%) of the unimpaired capital and surplus of such banking corporation provided the additional liabilities are adequately secured by shipping documents, warehouse receipts or other similar documents transferring or securing title covering readily marketable, non-perishable staples, which staples must be fully covered by insurance, and must have a market value equal to at least one hundred and twenty-five per cent (125%) of such additional liabilities. casia Loan accommodations granted by commercial banks to any other bank, as well as deposits maintained by them in any bank licensed to do business in the Philippines, shall be subject to the loan limit to any single borrower as herein prescribed. Funds of rural bank, except those representing proceeds of Special Time Deposits (STDs) and rediscounting, deposited with any other bank shall at no time exceed an amount equivalent to fifteen per cent (15%) of the unimpaired capital and surplus of the rural bank: Provided , That with prior clearance from the Director, Department of Rural Banks and Savings and Loan Associations, a rural bank may exceed the limit herein prescribed if there is only one depository bank in the locality where the rural bank is situated. SUBSECTION 1301.1 Exclusions from loan limit . In addition to those enumerated in Sec. 1301, the following loans or liabilities shall be excluded in determining the single borrower's loan limit prescribed under the first paragraph of said section: a. The discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper which are actually owned by the person, company, corporation or association negotiating the same; b. The unused portion of "Authority to Pay" locally known as commercial letter of credit, which is issued for the purpose of financing importation of goods; c. Credit accommodations to finance the importation of rice and corn to the extent of 100% of the unimpaired capital and surplus of the bank concerned, subject to the following conditions: (1) The importation shall be made in pursuance of a national policy duly enunciated by the National Government; (2) The importation shall have been approved by the National Economic Development Authority (NEDA); (3) The letter of credit shall specify that the importation shall be made with a certification from the National Grains Authority (NGA), now National Food Authority (NFA), or the consular establishment of the Philippine Government at the source of any such shipment to the effect that the commodity being imported is either rice or corn; and (4) The relative bills of lading shall specify in addition to the name of the importer concerned, that the NFA shall be the consignee of the shipment; d. The portions of the special time deposit loans covered by IGLF guarantee shall be excluded in the determination of the maximum aggregate loans which a commercial bank may grant to a person, company, corporation or firm; e. The portion of a bank loan guaranteed by the Philippine Export and Foreign Loan Guarantee Corporation which is not past due; f. Accommodations to authorized gold dealers; and g. Certain loans to officers and employees of local branches of foreign banks. h. The total liabilities of a commercial paper issuer for commercial papers held by an expanded commercial bank as selling agent or a firm underwriter shall not be counted in determining compliance with the loan limit to a single borrower within a period of one hundred eighty days from the acquisition of the commercial paper by an expanded commercial bank; Provided , That in no case shall such liabilities exceed five per cent (5%) of the net worth of the selling agent beyond the normal applicable single borrower limit. i. Commitments under a committed credit line issued by the bank in favor of a registered commercial paper issuer as provided under Subsection 1348.2. ( Effective April 29, 1985 ). The liabilities to the bank of borrowers whose papers were discounted and/or rediscounted by banks with the Central Bank or any other institution shall not be deemed as having been extinguished by the discount and/or rediscount, but shall be considered as still existing and shall be included in determining the total loans to a single borrower for purposes of compliance with Section 23 of Republic Act No. 337, as amended, until such papers are paid by the borrowers. SUBSECTION 1301.2 Definition of terms . For the purpose of implementing Section 23 of Republic Act No. 337, as amended, and the provisions of this section, the following definition of terms and phrases shall serve as guide: a. The term "liabilities" shall mean the direct liability of the maker or acceptor of paper discounted with or sold to such bank and the liability of the indorser, drawer or guarantor who obtains a loan from or discounts paper with or sells papers under his guaranty to such bank and shall include in the case of liabilities of a co-partnership or association, the liabilities of the several members thereof and shall include in the case of liabilities of a corporation, all liabilities of all subsidiaries thereof in which such corporation owns or controls a majority interest: Provided , That even if the parent corporation, co-partnership or association has no liability to the bank, the Monetary Board may prescribe the combination of the liabilities of subsidiary corporations or members of the co-partnerships or association under certain circumstances, including but need not be limited to any of the following situations: (1) the parent corporation, co-partnership or association guarantees the repayment of the liabilities; (2) the liabilities were incurred for the accommodation of the parent corporation or another subsidiary or of the co-partnership or association; or (3) the subsidiaries through separate entities operate merely as departments or divisions of a single entity: Provided , further , That the discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper actually owned by the person negotiating the same, shall not be considered as money borrowed for the purpose of this Item: Provided , finally , That certain types of contingent liabilities of borrowers may be included among total liabilities as may be determined by the Monetary Board. (As amended by Section 1 of Circular 1146 dated May 27, 1987) b. The term "money borrowed" shall include the direct liability of the maker or acceptor of paper discounted with or sold to such bank, commercial or business paper actually owned and discounted by the person negotiating the same, which are either past due or renewed at maturity; and bills of exchange which exempt the drawer from liability and holds only the acceptor liable. c. The term 'unimpaired capital and surplus' the combined capital accounts of such bank, and shall include its paid-in capital and surplus. The term 'surplus' shall include the sum of such items representing the excess of the assets over the sum of the liabilities and paid-in capital of the bank, but excluding not only the reserves set aside for valuation purposes, but also reserves set aside to cover liabilities, and deferred income tax as defined under item 'j' of subsection 1116.4. ( Effective April 23, 1985 ). d. "Readily marketable non-perishable staples" shall mean articles of commerce, agriculture or industry of such uses as to make them the subject of constant dealings in ready markets with such frequent quotations as to make their prices easily and definitely ascertainable, or which lend themselves easily to disposal by sale at any time to pay the obligations secured by the said staples and which are non-perishable in character, and reasonably sure of maintaining their values as security at least for the duration of the obligation secured by the said staples or the usance of the draft drawn against them. A staple is not considered readily marketable if it is imported not for resale, but for the exclusive use of the buyer or the importer such as, machinery, equipment and construction materials which are to be used exclusively for the construction of the factory or building belonging to the buyer or importer of the said staple. e. The term "bill of exchange drawn in good faith against actually existing values" shall mean one which is drawn by a seller on the purchaser for the purchase price of commodities sold. A bill of exchange, whether drawn against goods for exports or against goods to be sold locally, which is discounted or purchased by a bank is a bill drawn against existing values only when it is accompanied by shipping documents, warehouse receipts or other papers securing title to the goods sold. However, bills of exchange drawn in good faith against actually existing values as defined in this paragraph, which are past due or the maturities of which have been extended, shall be considered as additional loans authorized under the second paragraph of Section 23 of Republic Act No. 337, as amended, and shall be subject to the fifteen per cent (15%) limitation provided therein. f. The term "commercial or business paper actually owned by the person negotiating the same" shall mean a paper arising from an actual business transaction. A trade acceptance or promissory note actually owned by the person negotiating the same is a commercial or a business paper. However, if a bill is drawn against an agent or fictitious drawee, or if a promissory note is executed by an agent or fictitious drawee, neither is a commercial nor a business paper. Commercial or business papers actually owned and discounted by the person negotiating the same, which are past due or the maturity of which have been extended, shall be considered as money borrowed and shall be subject to the limitation of fifteen per cent (15%) provided in the first paragraph of Section 23 of Republic Act No. 337, as amended. SUBSECTION 1301.3 Contingent liabilities included in loan limit . The total amount of (a) outstanding standby and deferred letters of credit less marginal deposits, and (b) outstanding guarantees, shall be included in the determination of the single borrower's loan limit under Section 23 of Republic Act No. 337, as amended, except the following: a. Letters of credit to guarantee construction contracts abroad of Philippine firms and letters of credit to guarantee construction of local projects which are foreign assisted and internationally bidded, the contracts for which have been won by Philippine contractors; b. Letters of credit for the account of government-owned or controlled corporations which are fully guaranteed by the National Government or its instrumentalities; and c. Letters of credit to the extent or portion thereof guaranteed by the Philippine Export and Foreign Loan Guarantee Corporation and other duly authorized government agencies. Any excess over the single borrower's loan limit, resulting from the application of the foregoing regulation, shall be phased out within a period of one year from May 28, 1982. (As amended by Section 1 CBP Circular 1123 dated December 5, 1986) SUBSECTION 1301.4 (Additional provision as provided by CBP Circular 1295 dated July 16, 1991) SECTION 1302. Loan Proceeds . Before granting a loan, banks shall ascertain the purpose of the loan which shall be clearly stated in the contract between the bank and borrower. The proceeds of a loan shall be utilized only for the purpose(s) stated in the loan contract; otherwise, the bank may terminate the loan and demand immediate repayment of the obligation. Notwithstanding the preceding sentence, the proceeds of a loan may be utilized by the borrower of a purpose(s) other than that originally stated in the loan contract: Provided , That such other purpose(s) is/are among those for which the lending bank may grant loans under existing laws and regulations: Provided further , That such utilization shall be with the prior written approval of duly authorized officer(s)/committee of the lending bank/its Board of Directors and such written approval shall form part of the contract between the bank and the borrower. SUBSECTION 1302.1 Derivative/compensating deposits . Banks shall, in no case, require borrowers to leave behind or deposit back with them (lending banks) a portion of the loan proceeds, whether in the form of demand, savings or time deposits. Likewise, no banks shall, during the processing of any loan application or at any time after approval thereof or release of the loan proceeds, enter into any form of agreement, irrespective of the purpose thereof under which the borrower shall be prohibited from, or limited in, making withdrawals from any of his deposit accounts with such bank while any portion of his loan is outstanding: Provided , however , That this prohibition shall not apply in cases of loans secured by a hold-out on deposit(s) to the extent of the unencumbered amount of the deposit(s) existing at the time of the filing of the abovementioned loan application. The balance of loans granted under the supervised credit program and deposited in special savings deposits of farmers-borrowers is not covered by the aforementioned prohibition. SUBSECTION 1302.2 Acquisition of preferred shares . Banks are hereby prohibited from requiring their borrowers to acquire preferred shares of stock of the lending banks out of loan proceeds. SECTION 1303. Interest and Other Charges . The rate of interest, including commissions, premiums, fees and other charges, on any loan, or forbearance of any money, goods or credits, regardless of maturity and whether secured or unsecured, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended. ( Effective January 1, 1983 ). SUBSECTION 1303.1 Rate of interest in the absence of stipulation . The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of express contract as to such rate or interest, shall be twelve per cent (12%) per annum. SUBSECTION 1303.2 Escalation clause ; when allowable . Effective March 17, 1980, parties to an agreement pertaining to a loan or forbearance of money, goods or credits may stipulate that the rate of interest agreed upon may be increased in the event that the applicable maximum rate of interest is increased by the Monetary Board: Provided , That such stipulation shall be valid only if the there is also a stipulation in the agreement that the rate of interest agreed upon shall be reduced in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board: Provided , further , That the adjustment in the rate of interest agreed upon shall take effect on or after the effectivity of the increase or decrease in the maximum rate of interest. SUBSECTION 1303.3 (Deleted by Circular No. 905) SUBSECTION 1303.4 Floating rates of interes t. The rate of interest on a floating rate loan during each interest period shall be stated on the basis of a reference rate plus a margin as may be agreed upon by the parties. ( Effective January 1, 1983 ) Reference rates for various interest periods shall be determined and announced by the Central Bank every week and shall be based on the weighted average of the interest rates paid during the immediately preceding week by the ten (10) commercial banks with the highest levels of outstanding deposit substitutes on promissory notes issued by such banks, with maturities corresponding to the interest periods for which such reference rates are being determined. The commercial banks to be included for purposes of computing the reference rates shall be reviewed and determined at the beginning of every calendar semester on the basis of the levels of their outstanding deposit substitutes as of May 31 or November 30, as the case may be. The rate of interest on floating rate loans, existing and outstanding as of April 2, 1982 shall continue to be determined on the basis of the reference rate obtained from the weighted average of the interest rates paid by the five banks with the largest volume of business transacted during the immediately preceding thirty (30) days, on time deposits with maturities of more than seven hundred thirty (730) days, which shall be announced by the Central Bank every month for as long as such loans are existing and outstanding: Provided , however , That the parties to such existing floating rate loan agreements are not precluded from amending or modifying their loan agreements by adopting a floating rate of interest determined on the basis of the reference rate mentioned in the preceding paragraph. Where the loan agreement provides for a floating interest rate, the interest period, which shall be such period of time for which the rate of interest is fixed shall be such period as may be agreed upon by the parties. (As amended by BSP Circular 99 dated December 23, 1995) SUBSECTION 1303.5 Accrual of interest earned on loans . All banks are allowed to accrue interest earned on loans, subject to the following guidelines and/or procedures: a. Only interest earned on current loans shall be accrued. Therefore, no accrual of interest income is allowed if the loans or loan installments have matured or have become past due, in accordance with the criteria for past due accounts or loan installments in arrears, provided in Sec. 1304. Current loans , as used herein includes extended, renewed and restructured loans. (As amended by Section 1 of CBP Circular 1147 dated June 19, 1987) b. Interest earned on extended, renewed or restructured loans may be accrued, provided there is no previously accrued but uncollected interest thereon. c. Accrued interest earned but not yet collected/received on loans or loan installments shall not be considered as profits and/or earnings eligible for dividend declaration and/or profit-sharing purposes. d. A contra account to be designated "Allowance for Uncollected Interest on Loans" shall be set up if accrued interest receivable on loans or loan installments as set up in Items "a" and "b" above is still uncollected after six (6) months from the date such loans or loan installments have matured or have become past due. e. The amount representing Allowance for Uncollected INTEREST ON Loans may be chargeable against the excess of outstanding valuation reserves for loans and other risk assets as appearing in the bank's books, over those recommended by appropriate supervising and examining department of the Central Bank. The balance thereof, if any, shall be chargeable against operations. f. For all purposes, the Allowance for Uncollected Interest on Loans shall be considered a valuation reserve/allowance against the Accrued Interest Receivable account. SUBSECTION 1303.6 (Deleted by Circular 1021) SUBSECTION 1303.7 Service fees and other charges on loans to land reform beneficiaries . Banks and other financial institutions may, upon release of each loan to beneficiaries of land reform, collect, exclusive of interest on such loan, service fees and other charges not exceeding two per cent (2%) or P150 per annum whichever is lower. cd SECTION 1304. Past Due Accounts . Past due accounts of a financial intermediary shall, as a general rule, refer to all accounts in its loan portfolio, all receivable components of trading accounts securities, and other receivables, as defined in the Manuals of Accounts for banks, which are not paid at maturity. SUBSECTION 1304.1 Accounts considered past due . The following shall be considered as past due: a. A loan or receivable payable on demand not paid upon written demand as required in Subsec. 1304.2 or within one (1) year from date of grant or renewal, whichever comes earlier; b. A customer's liability import bill (sight) outstanding after thirty (30) days from date of original entry; c. Bills purchased and other negotiable instruments not paid at maturity, or dishonored upon presentment for acceptance of payment, whichever comes earlier: Provided , however , That out-of-town checks lodged under "Bills Purchased (Domestic Bills Purchased Clean)" shall be considered past due thirty (30) days from purchase; d. A temporary overdraft when such overdrawing or any charge or item lodged under TOD is not cleared within fifteen (15) days from date of grant; (As amended by Section 2 of CBP Circular 1147 dated June 19, 1987) e. The total outstanding balance of a loan or receivable payable in installments, in accordance with the following schedule: Mode of Payment Installment in Arrears Monthly 10 or more Quarterly 4 or more Semestrally 3 or more Annually 2 or more (As amended by Section 4 of CBP Circular 1147 dated June 19, 1987) f. Any due and unpaid loan installment or portion thereof, from the time the obligor defaults, for the purpose of determining delinquency in the payment of obligations as defined in Subsec. 1143.1.e; and (As amended by Section 5 of CBP Circular 1147 dated June 19, 1987) g. All items in litigation as defined in the Manuals of Accounts for banks and non-bank financial intermediaries. SUBSECTION 1304.2 Demand loans . Banks shall, in case of non-payment of a demand loan, make a written demand within six (6) months following the grant of such loan. The demand shall indicate a period of payment which shall not be later than six (6) months from date of said demand. SUBSECTION 1304.3 Accrual of interest income . No interest income shall be accrued on past due accounts. Interest on past due accounts shall be taken up as income only when actual payments thereon are received. SUBSECTION 1304.4 Renewals/extensions . Except as may be authorized by existing regulations on renewal, no loan shall be renewed or its maturity date extended unless the corresponding accrued interest receivable shall have been paid. SUBSECTION 1304.5 Reporting requirements . Banks shall report the end-of-month level of their past due accounts and installments in arrears for less than the number indicated in Subsec. 1304.1.e, and for those using the accrual basis of accounting, the accrued interest thereon, subject to Subsec. 1304.3. SUBSECTION 1304.6 Restructuring or refinancing of loans . Restructuring or refinancing of a loan or an advance may be favorably considered when the arrearages thereon, including interest and other charges, amount to less than twenty per cent (20%) of the total outstanding obligation including interest and other charges: Provided , That: (1) the security position permits (which should be realistic, i.e., the loan value, as prescribed under Section 78 of Republic Act No. 337, as amended, of the collaterals exceeds or equals the outstanding balance of the loan plus accrued interest and other charges); and (2) the accrued interest so restructured is credited to "Interest Earned Not Yet Collected" or other account of similar import, and treated as a deferred credit pending its collection. Note: Amendments of 1304.6 as provided by the following CBP Circulars: 1) CBP Circular 1155 dated September 4, 1987 and; 2) CBP Circular 1180 dated August 24, 1988 SUBSECTION 1304.7 Writing-off of loans as bad debts a. Definition of loans and advances . The term "loans and advances" shall include all types of credit accommodations granted to, and advances made by the bank for the account of, the borrowers/debtors, including interest thereon recorded in the books. b. Frequency of write-off . Writing-off of loans and advances by all banking institutions shall be made not oftener than twice a year by its Board of Directors. Note: Amendments of 1304.7 as provided by the following CBP Circulars: 1) CBP Circular 1169 dated January 13, 1988 and; 2) CBP Circular 1185 dated October 10, 1988 c. Procedural requirements . Notice/application for write-off of loans and advances shall be submitted, on the prescribed form, to the Department of Commercial and Savings Banks at least thirty days prior to the intended date of write-off: Provided , That no such loans and advances with an aggregate outstanding amount of 100,000 or more, as certified in said notice/application, shall be written-off without the prior approval of: (1) the Monetary Board, in the case of loans and advances to directors, officers and stockholders of the bank, direct or indirect, as defined in Sec. 1329 or (2) the head of the Department of Commercial and Savings Banks subject to confirmation by the Monetary Board, in the case of loans and advances other than those mentioned in Item (1) above. SECTION 1305. Truth in Lending Act Disclosure Requirement . All banks and non-bank financial intermediaries authorized to engage in quasi-banking functions are required to strictly adhere to the provisions of Republic Act No. 3765, otherwise known as the "Truth in Lending Act", and shall make the true and effective cost of borrowing an integral part of every loan contract. SUBSECTION 1305.1 Requirement of disclosure . Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth the following information: a. The cash price or delivered price of the property or service to be acquired; b. The amounts, if any, to be credited as down payment and/or trade-in; c. The difference between the amounts set forth under clauses (a) and (b); d. The charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit; e. The total amount to be financed; f. The finance charges expressed in terms of pesos and centavos; and g. The percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. The contract covering the credit transaction, or any other document to be acknowledged and signed by the debtor, shall indicate the above seven items of information. In addition, the contract or document shall specify additional charges, if any, which will be collected in case certain stipulations in the contract are not met by the debtor. The format of the disclosure statement on loan/credit transaction prescribed by the Monetary Board for use by banks, building and loan associations and non-stock savings and loan associations is found in Appendix 21, a copy of which disclosure statement shall be furnished every borrower. SUBSECTION 1305.2 Definition of terms a. Creditor (who shall furnish the information) means any person engaged in the business of extending credit (including any person who as a regular business practice makes loans or sells or rents property or services on a time, credit, or installment basis, either as principal or as agent) who requires as an incident to the extension of credit, the payment of a finance charge. The term creditor shall include, but shall not be limited to, banks and banking institutions, insurance and bonding companies, savings and loan associations, credit unions, financing companies, installment houses, real estate dealers, lending investors, pawnshops, and any other person or entity engaged in the business of extending credit, who requires as an incident to the extension of credit, the payment of a finance charge. b. Person means any individual, corporation, partnership, association, or other organized group of persons, or the legal successor or representative of the foregoing, and includes the Philippine Government or any agency thereof or any other government, or any of its political subdivisions, or any agency of the foregoing. c. Cash price or delivered price , in case of trade transactions, is the amount of money which would constitute full payment upon delivery of the property (except money) or service purchased at the creditor's place of business. In the case of financial transaction, cash price represents the amount of money received by the debtor upon consummation of the credit transaction, net of finance charges collected at the time the credit is extended (if any). d. Down payment represents the amount paid by the debtor at the time of the transaction of partial payment for the property or service purchased. e. Trade-in represents the value of an asset, agreed upon by the creditor and debtor, given at the time of the transaction in partial payment for the property or service purchased. f. Non-finance charges correspond to the amounts advanced by the creditor for items normally associated with the ownership of the property or of the availment of the service purchased which are not incident to the extension of credit. For example, in the case of the purchase of an automobile on credit, the creditor may advance the insurance premium as well as the registration fee for the account of the debtor. g. Amounts to be financed consists of the cash price plus non-finance charges less the amount of the down payment and value of the trade-in. h. Finance charge represents the amount to be paid by the debtor incident to the extension of credit such as interest or discounts, collection fees, credit investigation fees, attorney's fees, and other service charges. The total finance charge represents the difference between (a) the aggregate consideration (down payment plus installments) on the part of the debtor, and (b) the sum of the cash price and non-finance charges. i. Simple annual rate is the uniform percentage which represents the ratio, on an annual basis, between the finance charges and the amount to be financed. In the case of a single payment upon maturity, the simple annual rate in per cent is determined by the following method: ( finance charge ) ( 12 ) R = x x 100% (amount to be (maturity financed) period in months) In the case of the normal installment type of credit of at least one year in duration, where installment payments of equal amount are made in regular time periods spaced not more than one year apart, the simple annual rate (R), in per cent, is computed by the following method: (number of payments ( finance charge ) in a year) R = 2x x x 100% (amount to be (total no. of payments financed) plus one) In cases where the credit matures in less than one year (e.g., installment payments are required every month for six months), the same formula will apply except that the number of payments in a year would refer to the number of installment periods, as defined in the credit contract if the credit matures in one year. For example, the number of payments a year would be twelve for this purpose in cases where six monthly installment payments are called for in the credit transaction. 1 In cases where credit terms provide for premium or penalty charges depending on, say the timeliness of the debtor's payments, the annual rate to be disclosed in writing shall be this rate for regular payments, i.e., the premium penalty need not be taken into account in the determination of the annual rate. Such premium or penalty charges shall, however, be indicated in the credit contract. SUBSECTION 1305.3 Scope of requirements . The foregoing regulations shall apply to all creditors engaged in the following types of credit transactions: a. Any loan, mortgage, deed of trust, advance and discount; b. Any conditional sales contract, any contract to sell, or sale or contract of sale of property or services, either for present or future delivery, under which part or all of the price is payable subsequent to the making of such sale or contract; c. Any rental-purchase contract; d. Any contract or arrangement for the hire, bailment, or leasing of property; e. Any option, demand, lien, pledge, or other claim against, or for delivery of, property or money; f. Any purchase, or other acquisition of, or any credit upon the security of, any obligation or claim arising out of any of the foregoing; and g. Any transaction or series of transactions having a similar purpose or effect. Considering that the specific purpose of the law is the full disclosure of the true cost of credit, the following categories of credit transactions are outside the scope of the above regulations: LexLib a. Credit transactions which do not involve the payment of any finance charge by the debtor; and b. Credit transactions in which the debtor is the one specifying a definite and fixed set of credit terms such as bank deposits, insurance contracts, sale of bonds, etc. SUBSECTION 1305.4 Inspection of contracts covering credit . Every creditor shall keep in his office or place of business copies of contracts covering all credit transactions entered into by him which involve the extension of credit to another and the payment of finance charges therefor. Such copies shall be available for inspection or examination by the Director of the Department of Commercial and Savings Banks or his duly authorized deputies. In case the seven items of information mentioned in Subsec. 1305.1 are not disclosed in the contract covering the credit transaction, said items, to the extent applicable, shall be disclosed in another document in a form to be prescribed by the Monetary Board, to be signed by the debtor and appended to the main contract. SUBSECTION 1305.5 Information sheets and reports to be submitted to the Central Bank . Every creditor shall file with the Department of Commercial and Savings Banks an information sheet and such other reports as the Director of the said Department may require, in the form or forms to be prescribed by the Monetary Board, regarding credit transactions entered into by such creditor. SUBSECTION 1305.6 Posters . Every creditor shall post in conspicuous places in his principal place of business, and branches, if any, an abstract of the provisions of Republic Act No. 3765 in the form prescribed by the Monetary Board (Appendix 22) which shall be reproduced in a format 60 cm. wide and 75 cm. long. SUBSECTION 1305.7 Offices authorized to enforce rules and regulations . All orders, policies, instructions, rules and regulations promulgated by the Monetary Board to implement Republic Act No. 3765 shall be enforced by the Department of Commercial and Savings Banks with respect to commercial banks. The head of the Department of Commercial and Savings Banks shall have the authority to input or examine, personally or by deputy, all books, documents, papers or records of any creditor, necessary in his judgment to ascertain the facts relative to any credit transaction where the creditor requires as an incident to the extension of credit, the payment of a finance charge. Furthermore, he may require creditor to submit data or information regarding contracts within the purview of Republic Act No. 3765 which he may deem necessary in carrying out the purposes of said Act. SUBSECTION 1305.8 Penal provisions . The provisions of Section 6 of Republic Act No. 3765 shall apply in cases of non-compliance with or violation of the Act or any regulation issued thereunder. Non-compliance with the provisions on the disclosure statement and the posting of the abstract of Republic Act No. 3765 shall subject the creditor concerned to such administrative sanctions as the Monetary Board shall impose. B. SECURED LOANS SECTIONS 1306-1310. (Reserved) SECTION 1311. Loans Secured by Real Estate Mortgage . Loans against real estate security shall not exceed seventy per cent (70%) of the appraised value of the respective real estate security, plus seventy per cent (70%) of the appraised value of the insured improvements, and such loans shall not be made unless title to the real estate shall be in the mortgagor. In the event of foreclosure, whether judicially or extrajudicially, of any mortgage on real estate which is security for any loan granted before the passage of this Act or under the provisions of this Act, the mortgagor or debtor whose real property has been sold at public auction, judicially or extrajudicially, for the full or partial payment of an obligation to any bank, banking, or credit institution, within the purview of this Act, shall have the right, within one year after the sale of the real estate as a result of the foreclosure of the respective mortgage, to redeem the property by paying the amount fixed by the court in the order of execution, or the amount due under the mortgage deed, as the case may be, with interest thereon at the rate specified in the mortgage, and all the costs and judicial and other expenses incurred by the bank or institution concerned by reason of the execution and sale and as a result of the custody of said property less the income received from the property. However, the purchaser at the auction sale concerned shall have the right to enter upon and take possession of such property immediately after the date of the confirmation of the auction sale and administer the same in accordance with law. SUBSECTION 1311.1 Insurance on real estate improvements . The required insurance on improvements used as collateral for loans should be such as shall be sufficient to secure seventy per cent (70%) of the appraised value of such improvements or, if inadequately insured, the loan value shall correspond to the extent of insurance taken on such improvements. SECTION 1312. (Reserved) SECTION 1313. Increased Loan Value of Collaterals . Pursuant to Section 78 of Republic Act No. 337, as amended, the following special cases shall have increased loan values: a. Loans for house building and subdivision development for low and middle-income families against real estate security may be granted up to eighty per cent (80%) of the appraised value of the real estate security: Provided , That 1) such loans shall not be made unless the title to the real estate security is in the name of the borrower or mortgagor, and 2) the subdivision/housing project or plan has been approved by the proper authorities or up to ninety per cent (90%) of the appraised value of the real estate security if such loans are fully guaranteed by the Home Financing Commission (HFC) or other similar government institutions, in addition to the foregoing conditions. b. Loans for the acquisition of any instrument, machinery and other equipment for the use of the borrower in the production, processing, transformation, handling or transportation of agricultural and industrial products may be granted up to sixty per cent (60%) of the appraised value of the assets so acquired with the proceeds of the loan: Provided , That such loans shall not be made unless title to the chattels is in the name of the borrower or mortgagor. If such loan is secured by real estate, the loan may amount up to eighty per cent (80%) of the appraised value of the real estate: Provided , That title to the real estate security is in the name of the borrower or mortgagor. SECTION 1314. Loans Secured by Time Deposits . The following rules shall govern the grant of loans secured by hold-outs on and/or assignment of certificates of time deposits issued by banks, i.e., the lending bank, or any bank other than the lending bank, as well as their branches or subsidiaries abroad: "a. The original copy of the Certificate of Time Deposit subject to hold-out or assignment shall be surrendered to the lending bank, covered by a Deed of assignment or hold-out agreement; "b. The depository bank, other than the lending bank, shall be furnished a copy of the Deed of Assignment or hold-out agreement on the deposit used as collateral; "c. If the term of the Certificate of Time Deposit subject to hold-out or assignment is shorter than the term of the loan, there shall be an agreement in writing that renewal of the time deposit upon maturity shall be made at least coterminous with the term of the loan; "d. There shall be no pre-termination of the time deposit without the consent of the lending bank and unless an acceptable substitute collateral for the loan has been made; and "e. Within twenty-four (24) hours from the release of the loan, a report thereon shall be submitted to the appropriate supervising and examining department of the Central Bank together with copies of collateral and other pertinent documents. ( Effective Sept . 6 , 1985 ). (As amended by CBP Circular 1135 dated February 23, 1987) SECTIONS 1315-1318. (Reserved) C. UNSECURED LOANS SECTION 1319. Loans Against Personal Security . The following regulations shall govern credit accommodations against personal security granted by banks authorized to grant such credit accommodations. SUBSECTION 1319.1 General guidelines . Before granting credit accommodations against personal security, banks must exercise proper caution by ascertaining that the borrowers, co-makers, indorsers, sureties and/or guarantors possess good credit standing and are financially capable of fulfilling their commitments to the bank. For this purpose, banks shall keep records containing information on the credit standing and financial capacity of credit applicants. SUBSECTION 1319.2 Proof of financial capacity of borrower . As minimum requirements, in addition to the usual personal information sheet about the borrower, banks shall require that an application for a credit accommodation against personal security be accompanied by: a. a certified true copy of the latest income tax return of the borrower, in all cases, and b. a certified true copy of the corresponding annual financial statement duly certified by an independent certified public accountant, if the borrower is engaged in business and the credit accommodation applied for exceeds P100,000. SUBSECTION 1319.3 Amounts and terms of credit accommodations ; renewals . Banks shall grant credit accommodations against personal security only in amounts and for the periods of time essential for the completion of the operations to be financed. Any extension or renewal of such credit accommodations may be granted only in the amounts and for the periods of time essential for the completion of the particular operation originally financed, subject to the provisions of Subsec. 1304.4 on renewals. (As amended by Section 1 of CBP Circular 1245 dated June 29, 1990) SUBSECTION 1319.4 Signatories . Banks shall require that credit accommodations against personal security be made under the signature of the principal borrower and at least one co-maker, except in the case of a principal borrower whose responsibility and financial capacity are unquestionable in which case the signature of the borrower shall suffice. SUBSECTION 1319.5 Collateral requirement . When circumstances so warrant, banks may require applicants for credit accommodations against personal security to furnish collaterals, without subjecting such collaterals to the maximum loan values prescribed under the first and second paragraphs of Section 78 of Republic Act No. 337, as amended. Such credit accommodations shall continue to be subject to the provisions of this section. SUBSECTION 1319.6 Sanctions . The Department of Commercial and Savings Banks may recommend to the Monetary Board, for a violation of the provisions of this section, the imposition of any or a combination of the following sanctions: a. Disqualification of the bank concerned from the credit facilities of the Central Bank; and b. Prohibition of the bank concerned from the extension of additional credit accommodation against personal security. SECTIONS 1320-1325. (Reserved) D. LOANS AND OTHER CREDIT ACCOMMODATIONS TO DIRECTORS, OFFICERS; STOCKHOLDERS AND THEIR RELATED INTERESTS SECTION 1326. General Policy . Dealings of a bank with any of its directors, officers or stockholders and their related interests should be in the regular course of business and upon terms not less favorable to the bank than those offered to others. SUBSECTION 1326.1 Definitions . For purposes of these regulations, the following definitions shall apply: a. Directors shall refer to the bank directors duly holding their positions as such in accordance with the corporate charter and by-laws and pertinent provisions of law; b. Officers shall include the President, Vice Presidents and others mentioned as officers of the bank, or those whose duties as such are defined in the by-laws, or are generally known to be the officers of the bank (or any of its branches and offices other than the head office) either through announcement, representation, publication or any kind of communication made by the bank: Provided , That a person holding the position of Chairman or Vice-Chairman of the Board or another position in the Board, shall not be consider as an officer unless the duties of his position in the Board include functions of management such as those ordinarily performed by regular officers: Provided , however , That members of a group or committee, including sub-groups or sub-committees, whose duties include functions of management such as those ordinarily performed by regular officers, shall likewise be considered as officers for the purpose of these regulations. c. Stockholders shall refer to any stockholder of record in the books of the bank, acting personally, or through an attorney-in-fact, executor, administrator or guardian of a minor, incompetent and/or deceased stockholder or through a trustee designated by one or more stockholders pursuant to a voting trust agreement, whose stockholdings in the lending bank, individually and/or together with his spouse or relative within the first degree of consanguinity or affinity or relative by legal adoption; a partnership in which the stockholder or his spouse or any of his relatives mentioned above is a general partner; and a co-owner with the stockholder or the stockholder's spouse or relative mentioned above of a property, amount to two per cent (2%) or more of the total subscribed capital stock of the bank. d. Outstanding deposits shall refer to savings, time and demand deposits which are not subject to an assignment or hold-out agreement. e. Book value of the paid-in capital contribution shall mean the proportional amount of the bank's total capital accounts (net of such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank) as the corresponding paid-in capital contribution of each director, officer or stockholder concerned bears to the total paid-in capital of the bank: Provided , That as a basis for determining the individual ceiling referred to in Sec. 1330, the corresponding book value of the shares of stock of such director, officer or stockholder which are the subject of pledge, assignment or any other encumbrance shall be deducted therefrom. LLpr f. Total capital accounts of a Philippine branch of a foreign bank shall refer to: 1) The total capital accounts, if any, representing funds definitely assigned to the branch by its head office abroad; and 2) The net amount due by such branch to the head office and branches outside the Philippines, net of such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank. g. Total loan portfolio shall refer to the sum of all loan accounts outstanding, gross of valuation reserves, as reflected in the bank's consolidated statement of condition, excluding loans financed by special/specific funds from the government and government financial institutions such as Masagana 99, to the extent of the total outstanding loans granted from said special/specific funds. h. Secured loan, borrowing, or credit accommodation shall refer to: 1) any loan, discount, credit or advance, or portion thereof referred to in Sec. 1327 which is secured by real estate mortgage; chattel mortgage on tangible assets; stand-by letters of credit issued by foreign banks; assignment of or hold-out on deposits or deposit substitutes maintained in the lending bank; cash margin deposits; or assignment or pledge of government securities or readily marketable bonds and other high-grade debt securities except those issued by the lending entity; 2) customer's liability under import bills outstanding for not more than thirty (30) days from date of original entry; 3) sales contract receivable arising from sale of real property on credit where title to the property is retained by the bank. i. Unsecured loan, borrowing or credit accommodation shall refer to any loan, discount, credit or advance or portion thereof, referred to in Sec. 1327 which is not secured in accordance with paragraph "h" above. SECTION 1327. Transactions Covered . The terms "loan", "borrow", "money borrowed" and "credit accommodations" as used herein have reference to transactions which involve the grant, renewal or extension or increase of any loan, discount, credit or advance in any form whatsoever, and shall include: a. Any advance by means of an incidental or temporary overdraft, cash item, vale, etc.; b. Outstanding availments under an established credit line; c. Drawings against an existing letter of credit; d. The acquisition by discount, purchase, exchange or otherwise of any note, draft, bill of exchange or other evidence of indebtedness upon which a director, officer, or stockholder may be liable as a maker, drawer, acceptor, indorser, guarantor or surety; e. Any advance of unearned salary or other unearned compensation for periods in excess of 30 days; f. Loans or other credit accommodations granted by another financial intermediary to such director, officer or stockholder from funds of the bank invested in the other institution's trust or other department when there is a clear relationship between the transactions; g. Any advance by means of drawings against uncollected deposits (DAUDs); h. The increase of an existing indebtedness, as well as additional availments under a credit line or additional drawings against a letter of credit; i. The sale of assets, such as shares of stock, on credit; and j. Any other transactions as a result of which a director, officer or stockholder becomes obligated or may become obligated to the lending bank, directly or indirectly, by any means whatsoever to pay money or its equivalent. SECTION 1328. Transactions Not Covered . The terms "loan", borrow", "money borrowed" or "credit accommodations" as used herein shall not refer to the following transactions: a. Advances against accrued compensation, or for the purpose of providing payment of authorized travel, legitimate expenses or other transactions for the account of the bank or for utilization of maternity and other leave credits; b. The increase in the amount of outstanding credit accommodations as a result of additional charges or advances made by the bank to protect its interest such as taxes, insurance, etc.; c. The discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper actually owned by the person negotiating the same, including but not limited to the acquisition by a domestic bank of export bills from any of its directors, officers, stockholders (including foreign bank stockholders) and their related interests which are drawn in accordance with the terms and conditions of the covering letters of credit: Provided , That the transaction shall automatically be subject to the ceilings as herein provided once the director, officer or stockholder and/or their related interest who is a party to the transaction becomes directly liable to the bank; d. Transactions with a foreign bank which has stockholdings in the local bank where the foreign bank acts as guarantor through the issuance of letters of credit or assignment of a deposit in a currency eligible as part of the international reserves and held in a bank in the Philippines to secure credit accommodations granted to another person or entity: Provided , That the foreign bank stockholder shall automatically be subject to the ceilings as herein provided in the event that its contingent liability as guarantor becomes a real liability; and e. Deposits of a bank with another bank, whether domestic or foreign, which has stockholdings in the depositing bank. SUBSECTION 1328.1 Applicability to credit card operations . The credit card operations of a banking institution shall not be subject to these regulations where the credit card holder is a director, officer or stockholder of the bank: Provided , That (a) the privilege of becoming a credit card holder is open to all qualified persons on the basis of selective criteria which are applied by the bank to all applicants thereof; and (b) the bank director, officer or stockholder concerned reimburses the bank for advances made on availments on his credit card within a period of thirty (30) days from the date the bank made such advances. However, if the director, officer or stockholder concerned fails to reimburse the bank within the 30-day period mentioned herein, the transaction shall be subject to the applicable requirements of these regulations. SECTION 1329. Direct or Indirect Borrowings . For purposes of these rules on loans and other credit accommodations to directors, officers, stockholders and their related interests, a credit accommodation shall be considered a direct or indirect borrowing in accordance with the following criteria: a. Direct Borrowing . If the director, officer or stockholder of the lending bank is a party to any of the transactions enumerated in Sec. 1327 for himself, or as the representative or agent of others, or if he acts as a guarantor, indorser or surety for loans from the bank, or if the loan or credit accommodation to another party is secured by a property interest or right of the director, officer or stockholder. b. Indirect Borrowing . If in any of the transactions in Sec. 1327 the borrower, guarantor, indorser, or surety is a: 1) Spouse or relative within the first degree consanguinity or affinity, or relative by legal adoption, of a director, officer or stockholder of the bank; 2) Partnership of which a director, officer, or stockholder or his spouse or relative within the first degree of consanguinity or affinity, or relative by legal adoption, is a general partner; 3) Co-owner with the director, officer, stockholder or his spouse or relative within the first degree of consanguinity or affinity, or relative by legal adoption, of the property or interest or right mortgaged, pledged or assigned to secure the loans or credit accommodations, except when the mortgage, pledge or assignment covers only said co-owner's undivided interest; 4) Corporation, association, or firm of which a director or officer of the bank, or his spouse is also a director or officer of such corporation, association or firm, except (a) where the securities of such corporation, association or firm are listed and traded in the big board or commercial and industrial board of domestic stock exchanges and less than fifty per cent (50%) of the voting stock thereof is owned by any one person or by persons related to each other within the third degree of consanguinity or affinity; or (b) where the director, officer or stockholder of the lending bank sits as a representative of the bank in the board of directors of such corporation: Provided , That the bank representative shall not have any equity interest in the borrower corporation except for the minimum shares required by law, rules and regulations, or by the by-laws of the corporation: Provided , further , That the borrowing corporation under (a) or (b) is not among those mentioned in Items b(5) and b(6) of this section. 5) Corporation, association or firm of which any or a group of directors, officers, stockholders of the lending bank and/or their spouses or relatives within the first degree of consanguinity or affinity, or relative by legal adoption, hold/own more than twenty per cent (20%) of the subscribed capital of such corporation, or of the equity of such association or firm; 6) Corporation, association or firm wholly or majority-owned or controlled by any related entity or a group of related entities mentioned in Items b(2), b(4) and b(5) of this section. Other cases of direct/indirect borrowing shall be resolved on a case-to-case basis. It shall be the responsibility of the banking institution concerned to ascertain whether the borrower, guarantor, indorser or surety is related to persons mentioned in b(1) of this section or connected with any of the directors, officers or stockholders of the bank in any of the capacities mentioned in Items b(2), b(3), b(4), b(5) and b(6) of this section, or majority-owned or controlled by any related to persons mentioned in b (1) of this section or connected with any of the directors, officers or stockholders of the bank in any of the capacities mentioned in Items b(2), b(3), b(4), b(5) and b(6) of this section. SECTION 1330. Individual Ceiling . The total outstanding direct credit accommodations to each of the bank's directors, officers or stockholders shall not exceed, at any time, an amount equivalent to his outstanding deposits and book value of his paid-in capital contribution in the lending bank: Provided , That unsecured credit accommodations to each of the bank's director, officer or stockholder shall not exceed thirty per cent (30%) of his total credit accommodations. SECTION 1331. Aggregate Ceiling ; Ceiling on Unsecured Loans . Except with the prior approval of the Monetary Board, the total outstanding borrowings of directors, officers or stockholders, whether direct or indirect, shall not exceed fifteen per cent (15%) of the total loan portfolio of the bank or one hundred per cent (100%) of combined capital accounts net of deferred income tax as defined under item "j" of Subsection 1116.4, and such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank, which is lower: Provided , That in no case shall the total unsecured direct and indirect borrowings of directors, officers and stockholders exceed thirty per cent (30%) of the aggregate ceiling or the outstanding direct/indirect loans thereto, whichever is lower. For the purpose of determining compliance with the ceiling on unsecured loans, banks shall be allowed to average their ceiling on unsecured loans and their outstanding unsecured loans every quarter. ( Effective April 23, 1985 ). In evaluating requests for extension of loans in excess of the aggregate ceiling, the Central Bank shall consider the credit standing of the borrower, viability of the projects financed by such loans in relation to national objectives, collateral or security and other pertinent considerations. SUBSECTION 1331.1 Applicability to branches of foreign banks . The aggregate ceiling and the ceiling on unsecured loans prescribed herein shall also apply to a Philippine branch of a foreign bank. SECTION 1332. Exclusions from Aggregate Ceiling . The following credit accommodations shall be excluded in determining compliance with the aggregate ceiling. a. Credit accommodations or portions thereof to the extent covered by a hold-out on deposits or deposit substitutes, or covered by cash marginal deposits or secured by evidences of indebtedness of the Republic of the Philippines or of the Central Bank or by other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines; b. Credit accommodations to a corporate stockholder which meets all the following conditions: 1) The corporation is a non-financial institution; 2) Its shares are listed and traded in the big board or commercial and industrial board of domestic stock exchanges; 3) Its stockholdings in the lending bank do not exceed thirty per cent (30%) of the voting stock of the bank; and 4) No person or group of persons related within the first degree of consanguinity or affinity holds/own more than twenty per cent (20%) of the subscribed capital of the corporation. c. Credit accommodations to government-owned or controlled corporations, in cases where a director, officer or stockholder of the lending bank is a representative of the government in the borrowing corporation and does not hold any proprietary interest in such corporation: Provided , That other rules on loans to directors, officers, stockholders and their related interests, such as procedural and reportorial requirements under Section 83 of Republic Act No. 337, as amended, are followed. cdt SECTION 1333. Procedural Requirements . The following provisions shall apply if a director or officer is a party, directly or indirectly to, or acts as representative or agent of others in, any of the transactions enumerated under Sec. 1327. a. Approval of the Board ; when to obtain Except with the prior written approval of the majority of the directors, excluding the director concerned, no loan or other credit accommodation shall be granted nor shall any of the transactions enumerated under Sec. 1327 be entered into. b. Approval by the Board ; how manifested The approval as required in Item a above shall be manifested in a resolution passed by the Board of Directors duly assembled during a regular or special meeting for that purpose and made of record. c. Majority of the directors ; computation of The computation of the majority of the directors, excluding the director concerned, shall be based on the total number of direc- * private supervising and examining department of the Central Bank within 20 banking days from the date of approval. The copy may be a duplicate of the original, or a reproduction copy showing clearly the signatures of the approving directors: Provided , That if a reproduction copy is to be submitted, it shall contain on its face or reverse side a signed certification by the Secretary that it is a reproduction of the original written approval. SECTION 1334. Reportorial Requirements . Each bank shall maintain a record of loans covered by these regulations in a manner and form that will facilitate verification of such transactions by Central Bank examiners. The appropriate supervising and examining department of the Central Bank may require the banks to furnish such data or information as may be necessary for purposes of implementing the provisions of the foregoing rules. SECTION 1335. Availment of Credit Facility with the Central Bank . Whenever the total direct accommodations of a bank to the parties mentioned in Item a of Sec. 1329 reach 50% of the prescribed aggregate ceiling and the bank is applying for a loan or advance with the Central Bank, the Monetary Board may, upon the recommendation of the appropriate supervising and examining department, require as a condition for the extension of the credit facility the designation of a comptroller in the bank primarily for the purpose of bringing about the reduction of such accommodations. SECTION 1336. Sanctions . Violations of the provisions of the foregoing rules shall be subject to any or all of the following sanctions: a. Restriction or prohibition on the bank from declaring dividends until the outstanding loans and other credit accommodations have been reduced to within the herein prescribed ceilings. b. Disqualification of the directors voting for the approval of the loan or credit in excess of any of the ceilings prescribed in Secs. 1330 and 1331, from participating in the approval of loans or credits to officers, directors and stockholders of the bank: Provided , however , That the disqualification may be lifted by the Central Bank, as the circumstances may warrant. c. Application of (1) the borrowing director's or officers share in the bank's profit sharing program; and (2) the share of the director voting for the approval of the loan or credit accommodation, against the excess of such loan or credit accommodation over any of the herein prescribed ceilings for such period of time as may be approved by the Monetary Board. d. For the duration of each violation, imposition of a fine of 1/10 of 1% of the excess over the ceilings per day but not to exceed P500 a day on the following: 1) The lending bank and the director, officer or stockholder whose borrowing exceeds his individual ceiling; 2) Each of the directors voting for the approval of the loan or credit accommodation in excess of any of the ceilings prescribed in Secs. 1330 and 1331; 3) The director, officer or stockholder who assigns or subjects his outstanding deposits to a holdout agreement, or pledges his paid-in capital contribution in the lending bank, which deposits and capital contribution constitute the basis for determining his individual ceiling. The penalty for exceeding the individual ceiling, aggregate ceiling and ceiling on unsecured loans shall be computed on the average amount of loans in excess of said ceilings: Provided , That banks shall be permitted to offset daily loan balances which are in excess against those which are below said ceilings during the same week. e. Suspension or, after due hearing, removal from office of the director or officer: 1) Borrowing from the bank in excess of his individual ceiling; or 2) Subjecting to an assignment or hold-out agreement outstanding deposits and/or pledging paid-in capital contributions earmarked as basis for his individual ceiling resulting in his exceeding his individual ceiling. Directors voting for the approval of the loan or other credit accommodation in excess of any of the ceilings prescribed in Secs. 1330 and 1331 shall also be subject to such suspension or removal. SECTION 1337. Financial Assistance to Officers and Employees . Banks may provide financial assistance to their officers and employees, as part of their fringe benefit programs, to meet the housing, transportation, household and personal needs of their officers and employees. SUBSECTION 1337.1 Mechanics . The mechanics of such financial assistance shall be embodied in a financing plan, with the following minimum features: a. Participation shall be limited to full-time and permanent officers and employees of the bank. b. Financial assistance shall only be for the following purposes: 1) the acquisition of a residential house and lot, or the construction, renovation or repair of a residential house on a lot owned and to be occupied by the officer or employee; 2) the acquisition of vehicles, household equipment and appliances for the personal use of the officer or employee or his immediate family; or 3) to meet expenses for the medical, maternity, education or emergency needs of the officer or employee or his immediate family. (As amended by CBP Circular 1235 dated April 6, 1990) c. Financial assistance for purposes mentioned under Items b(1) and b(2) of this subsection may be granted in the form of a loan, advance or credit accommodation, installment sale, lease with option to purchase or lease-purchase arrangement where the lessee is obliged to purchase the real estate or equipment. d. The amount and maturity of financial assistance for each purpose shall be determined by the bank in consonance with the normal requirements thereof: Provided , That the maximum amount shall be stated as a percentage or multiple of the total monthly compensation of the officer or employee and shall be within the paying capacity of the borrowing officer or employee. Total monthly compensation shall include the basic salary and all fixed and regular monthly allowances of the officer or employee. Payments for sickness benefits and other special emoluments which are not fixed or regular in nature, or the commutation into cash of unused leave credits shall not be included in the computation of total monthly compensation. e. The amortization payment shall include amounts necessary to cover mortgage redemption insurance and fire insurance premiums, taxes, special assessments, and other related fees and charges. f. Availment of the financing plan to construct or acquire a residential house and lot shall be allowed only once during the officer's or employee's tenure with the bank, except where the right over the real estate previously acquired or constructed under the financing plan is absolutely transferred or assigned to another officer or employee of the bank or to a third party: Provided , That such third party shall have fully reimbursed the bank for the outstanding availment on the financing plan before the officer/employee is allowed to re-avail himself of the same financing plan. An officer or employee (or his spouse) who already owns a residential house and lot shall not be qualified to avail himself of financial assistance for purposes of acquiring a residential house and/or lot. These prohibitions notwithstanding, financial assistance for the repair or renovation of a residential house may be allowed subject to such limitations as may be prescribed by the bank pursuant to Item d of this subsection. g. Availment of the financing plan for the acquisition of a specific type of equipment or appliance shall be allowed not oftener than once every three (3) years: Provided , That re-availment shall be allowed only after previous obligations in connection with the acquisition of the same type of equipment or appliances have been fully liquidated. h. The bank shall adopt measures to protect itself from losses such as by incorporating in the plan or contract provisions requiring co-makers or co-signors, chattel or real estate mortgages, fire insurance, mortgage redemption insurance, assignment of money value of leave credits, pension or retirement benefits, including a provision for the restructuring of the loan under the bank's regular lending operations in case of termination or separation of the officer or employee for whatever cause. SUBSECTION 1337.2 Funding by foreign banks . In the case of local branches of foreign banks, financial assistance for their officers and employees may be funded, through any of the following means: a. Through a local affiliate by special arrangement with the head office abroad in any of the following forms: 1) Inward remittance from the head office of the affiliate; 2) Assignment to the affiliate of equivalent amounts of profits otherwise remittable abroad under existing regulations; or 3) Direct loans by the foreign bank to the affiliate; or b. Through the local branch itself by: 1) Segregation or transfer of Undivided Profits normally remitted to head office abroad equivalent to the loans to officers and employees which shall be lodged under "Other Liabilities Head Office Account". This account shall at all times have a balance equivalent to the outstanding loans to officers/employees financed under this scheme; or 2) Inward remittance; or c. Through the local branch from local sources without earmarking an equivalent amount of undivided profits: Provided , That the aggregate ceilings on such loans as provided under existing regulations shall apply. Loans under items b 1) and b 2) of this subsection shall be treated in the branch books as loans granted by its head office. The documentation and collection of such loans shall be handled by the branch for the account of the head office. Loans financed under a) and b) shall be subject to the reporting requirements of Sec. 1334 but not to the ceilings provided therein. The same shall be excluded from the computation of the capital to risk assets ratio. SUBSECTION 1337.3 Other conditions/limitations a. The investment by a bank in real estate, equipment and other chattels under its fringe benefit program for officers and employees shall be included in determining the extent of the investment of the bank in real estate and equipment for purposes of Section 25 of Republic Act No. 337, as amended. b. The investment by a bank in real estate, equipment and other chattels contemplated under these guidelines shall not be for the purpose of profit in the course of business for the bank. c. All loans or credit accommodations to bank officers and employees, except those granted under the fringe benefit program of the bank, shall be subject to the same terms and conditions imposed on the regular lending operations of the bank. Loans or credit accommodations granted to officers shall, in addition, be subject to the provisions of Section 83 of Republic Act No. 337, as amended, and Secs. 1326 to 1336 but not to the individual ceilings where such loans or credit accommodations are obtained under the bank's fringe benefit program. The aggregate outstanding loans and credit accommodations granted under the bank's fringe benefit program, inclusive of those granted to officers in the nature of lease with option to purchase, shall not exceed five per cent (5%) of the bank's total loan portfolio. SUBSECTION 1337.4 Reportorial requirements . Financing plans and amendments thereto shall be submitted to the Central Bank for prior approval within thirty (30) calendar days from approval thereof by the bank's Board of Directors. The appropriate supervising and examining department of the Central Bank may require the banks concerned to submit a regular report monitoring the various transactions under the bank's financing plans for officers/employees. Modification of existing programs to conform with these rules must be submitted within the period above stated. All banks providing financial assistance to bank officers/employees shall submit a report on "Availments of Financial Assistance to officers and employees under Central Bank Approved Plan" to the Central Bank within fifteen (15) banking days after end of reference semester. SUBSECTION 1337.5 Sanctions . Violations of the provisions of Subsecs. 1337.1 to 1337.4 shall, whenever applicable, be subject to the penalties under Section 83 of Republic Act No. 337, as amended. asiadc SECTIONS 1338-1340. (Reserved) E. SPECIFIC TYPES/CLASSES OF LOANS SECTION 1341. Agrarian Reform and Agricultural Credit . Pursuant to Presidential Decree No. 717, the following guidelines shall govern the grant of agrarian reform credit and agricultural credit by banks, government or private, as defined in Section 2 of Republic Act No. 337, as amended. SUBSECTION 1341.1 Definition of terms . For purposes of this subsection the following definitions shall apply: a. Loanable funds shall refer to total funds generated after the effectivity of Presidential Decree No. 717, the composition of which shall be determined by the appropriate department of the Central Bank. b. Agrarian reform credit shall refer to production and other types of loans granted to beneficiaries of agrarian reform for the following purposes: acquisition of work animals, farm equipment and machinery, seeds, fertilizers, poultry, livestock, feeds and other similar items; acquisition of lands authorized under the Agrarian Reform Code of the Philippines; construction and/or acquisition of facilities for production, processing, storage and marketing; and efficient and effective merchandising of agricultural commodities stored and/or processed by the facilities aforecited in domestic and foreign commerce. c. Agricultural credit in general shall include all loans and/or advances granted to borrowers, whether beneficiaries of agrarian reform or not, to finance activities relating to agriculture, and for processing, marketing, storage, and distribution of products resulting from these activities. d. Agrarian reform beneficiaries shall include tillers, tenant-farmers, settlers, agricultural lessees, amortizing owners, owner-cultivators, farmers' cooperatives and compact farms, as determined by the Ministry of Agrarian Reform. The term shall likewise include agricultural enterprises registered under Presidential Decree No. 1159 as well as projects undertaken pursuant to the Corporate Farming Program under General Order No. 47: Provided , That the borrower submits the following documents to the lending bank: 1) A certification from the Board of Investments to the effect that the borrower is an agricultural enterprise duly registered under Presidential Decree No. 1159; and 2) An endorsement of the Ministry of Agrarian Reform stating that land reform beneficiaries shall benefit from the agricultural enterprises' projects. SUBSECTION 1341.2 Who may borrow ; purposes a. All beneficiaries of agrarian reform credit mentioned under Presidential Decree No. 717 and its implementing regulations which credit shall be used for agricultural production or for other purposes mentioned therein shall be qualified borrowers under agrarian reform credit. The bases for determining who are agrarian reform beneficiaries are: 1) Documentary evidence, namely, certificate of land transfer or order of approval of application from Ministry of Agrarian Reform (MAR) or agreement to sell/order of award from MAR or its predecessors such as LTA and NARRA (in case of settlers), or 2) In the absence of documentary evidence above-stated, a certification from the nearest MAR office that borrower is an agrarian reform beneficiary. b. Qualified borrowers under agricultural credit in general are all corporations, entities, or private individuals engaged in agricultural production, processing, storage, marketing, or exportation of agricultural products; and, importation/manufacture/distribution of farm machineries and equipment, fertilizers, etc. used for agricultural production. SUBSECTION 1341.3 Required allocation for agrarian reform and agricultural credit in general . Each bank shall set aside an amount equivalent to at least twenty-five per cent (25%) of its loanable funds for agricultural credit in general, of which an amount equivalent to at least ten per cent (10%) of the loanable funds shall be made available for agrarian reform credit. Marketing credits to the following qualified borrower under the Grains Quedan Financing Program shall be considered as agrarian reform credits: a. Agrarian reform beneficiaries as defined by Presidential Decree No. 717; b. Registered agricultural enterprise duly endorsed by the nearest Office of the Ministry of Agrarian Reform per Presidential Decree No. 1159; c. G.O. 47 corporations or agro-service corporations employed by a G.O. 47 corporation which are certified by the Ministry of Agrarian Reform as engaged in grains production through linkage arrangements with agrarian reform beneficiaries; d. Area marketing cooperatives or Samahang Nayon duly registered with the Bureau of Cooperatives Development, Ministry of Agriculture: e. Registered agrarian reform beneficiaries' associations/other farm groups respectively endorsed as agrarian reform beneficiaries by the nearest Office of the Ministry of Agrarian Reform; Bureau of Cooperatives Development, Ministry of Agriculture: or the Farm Systems Development Corporation, National Irrigation Administration; or f. NFA registered warehousemen/millers/wholesalers whose grains inventory, subject to a chattel mortgage, trust receipts or pledged quedan, are duly sworn to under oath by grains businessmen-borrowers concurred in by the President of the Agrarian Reform Beneficiaries Association in the area as having been produced by agrarian reform beneficiaries. g. The National Food Authority: Provided , That the palay procurement operations thereof are certified by the Ministry of Agrarian Reform as having been obtained through direct/indirect linkage arrangements with agrarian reform beneficiaries, subject to such ceilings as may be imposed by the Central Bank/Ministry of Finance on the loans/advances to the NFA by private commercial banks. SUBSECTION 1341.4 Computation of loanable funds . Loanable shall be the net increase from May 29, 1975 to date of the report of the individual accounts which represent the following: The total bank funds consisting of deposits (demand, savings, time and NOW accounts) excluding foreign currency deposits under Circular No. 960; deposits of banks, net of due from other banks; bills payable (including borrowings from banks) net of interbank call loans with maturities not exceeding 15 days, proceeds from Central Bank rediscounting (except special time deposits), proceeds from special programs like the APEX, and special Central Bank credit accommodations in the form of emergency advances, overnight RPs and availment of overdraft facilities; total capital accounts; and added to the net increase are the total collections from the loan portfolio outstanding as of May 31, 1975 to date of the report less net increase of the following: bank premises, furniture and equipment (net book value); other property owned or acquired (representing properties acquired in satisfaction of debts); other assets; required reserves (reserves against deposit liabilities, deposit substitutes) but excluding reserves for marginal deposits; provisions for liquidity (1.5% of total deposits and demand liabilities); and loans to small and medium scale industries for export. ( Effective April 23, 1985 ). SUBSECTION 1341.5 Allowable alternative investment . In the absence of qualified borrowers, the following shall apply: a. Agrarian reform credit the amount set aside for agrarian reform credit not actually loaned out may be invested temporarily in government securities expressly declared eligible for the purpose by the Central Bank, subject to the following conditions: 1) such securities shall be held to maturity, without prejudice to the right of the holder bank to require the issuing government entity to monetize, encash or repurchase such securities whenever funds are needed by the bank for lending to the beneficiaries of agrarian reform; 2) such securities shall not be hypothecated or encumbered in any way or earmarked for any other purposes; 3) such securities shall be marked "For Agrarian reform Credit" and shall be segregated from the bank's investment portfolio; and 4) only the buying/lending bank may use, during the holding period, eligible government securities subject of a resale/repurchase agreement between private entities for purposes of compliance with this subsection, subject to the following: (a) the resale/repurchase should be for terms not less than thirty (30) days without pretermination during the first successive thirty (30) days, which condition shall be embodied in the resale/repurchase agreement; and (b) the buying/lending bank; with the consent of the selling/borrowing entity, shall register with the Central Bank its holdings of CBCIs under repurchase/resale agreement. b. Agricultural credit in general the amount set aside for agricultural credit in general not actually loaned out may be invested in commercial papers issued by entities engaged in agricultural production, processing, storage, marketing, or exportation of agricultural products; and importation, manufacture, distribution of farm machineries and equipment, fertilizers, etc. used for agricultural production: Provided , That for purposes of compliance with this subsection, only the buying/lending bank may use commercial papers acquired in a resale/repurchase agreement during the holding period thereof subject to the conditions in Item a(4) of this subsection. c. A certification under oath by the duly designated officer of the bank of the absence of qualified borrowers for agrarian reform credit or agricultural credit in general shall be submitted to the appropriate supervising and examining department of the Central Bank together with the report as required in Subsec. 1341.9. d. For Agri-Agra Requirement . Only the following government securities are eligible for purposes of registration of compliance with agri-agra requirement: a) Discounted 5-year Treasury Notes 9% Series 1 to 22 (MBR No. 150 dated January 22, 1982) b) CBCIs outstanding issues, except CBCI Special Series (MBR No. 2516 dated November 28, 1975) c) Discounted NDC Bonds Series AA to AC (MBR No. 422 dated February 26, 1982) d) DBP Countryside Bills 1st and 6th Series (MBR No. 2381 dated October 31, 1974) ( Effective July 8, 1985 ). SUBSECTION 1341.6 Syndicated type of agrarian reform credit/agricultural credit . Banks may grant a syndicated type of loan for agrarian reform credit/agricultural credit in general, either between or among themselves. The mechanics, including the recording of such syndicated type of loan transactions shall follow * a) Loans granted under agrarian reform credit shall be secured by any or a combination of: 1) Real estate property owned by the borrower his co-maker, not necessarily the same real estate property used by the borrower for his agricultural or farm project; 2) Poultry; 3) Stored crops in bonded warehouse; 4) Assets acquired with the proceeds of the loan, such as farm machinery; 5) One co-maker acceptable to the bank: Provided , That in case a borrower is a member of a cooperative, the cooperative may act as a co-maker: and Provided, further , That in case the borrower is a farmers' cooperative no co-maker shall be required; and/or 6) Other collateral acceptable to the bank, such as, but not limited to, standing crops, livestock or work animal, etc. b. For agricultural credit in general, loans shall be secured by the usual collateral required by banks. c. All financing institutions shall accept as collateral for loans any duly registered Land Transfer Certificate issued by the government, through the Ministry of Agrarian Reform, to tenant-farmers in an amount not less than sixty per cent (60%) of the value of the farmholding as determined under Presidential Decree No. 27: Provided , That (1) such loans shall be guaranteed by the Guarantee Fund established; by the Samahang Nayon (Barrio Association) in which a tenant-farmer is a full-pledged member and (2) the loans obtained shall be used in the improvement or development of the farmholding of the tenant-farmer or the establishment of facilities that will enhance production or marketing of agricultural products or increase farm income therefrom. Prior to the acceptance of the Certificate of Land transfer (CLT) issued pursuant to Presidential Decree No. 27 as collateral for loans, a certification shall be first secured from the offices of the Register of Deeds to the effect that the CLT being presented is still valid. SUBSECTION 1341.8 Interest and other charges . Interest, service fees and other charges shall be governed by existing rules and regulations. SUBSECTION 1341.9 Submission of reports . A monthly report on the following shall be submitted to the appropriate supervising and examining department of the Central Bank within twelve (12) banking days after end of each reference month: a. Utilization of loanable funds set aside for agrarian reform credit and agricultural credit in general; and b. Any change in the composition of government securities and commercial papers held as temporary investments for agrarian reform credit and agricultural credit in general, respectively. SECTION 1342. (Reserved) . SECTION 1343. Interbank Loans . All interbank loan transactions shall be submitted to the Central Bank Accounting Department by means of interbank loan advice or repayment transfer tickets from 9:00 a.m. to 12:00 noon of the succeeding banking day, for value the prior banking day. For this purpose, inter-bank loan transactions shall include, among others, (a) call loan transactions, (b) borrowings evidenced by deposit substitute instruments, and (c) purchases of receivables with recourse, and shall exclude funds borrowed by banks and non-bank financial intermediaries performing quasi-banking functions from trust departments of banks or investment houses in the latter's capacity as fund managers. Note: Amendments to Section 1343 as provided by the following CBP/BSP Circulars: 1) Section 4 of CBP Circular 1119 dated October 10, 1986 and; 2) Section 1 of BSP Circular 88 dated October 4, 1995 SUBSECTION 1343.1 Transfer tickets . The Central Bank Accounting Department shall not accept or give due course to interbank loan transfer tickets unless the following are complied with: a. Form 1) For granting of loans "Interbank loan advice transfer ticket" forms shall be used. The form to be accomplished by the lending bank/NBQB, whose account shall be debited by the Central Bank, shall be white in colors and the form to be accomplished by the borrowing bank/NBQB, whose account shall be credited by the Central Bank, shall be green in color. 2) For repayment of loans "Interbank loan repayment transfer ticket" forms shall be used. The form to be accomplished by the borrowing bank/NBQB making the payment and whose account shall be debited by the Central Bank, shall be yellow in color and the form to be accomplished by the lending bank/NBQB receiving the payment and whose account shall be credited by the Central Bank, shall be pink in color. b. Transfer tickets (prescribed forms shown in Appendix 23) shall have a standard size of 4 " x 8 " and shall contain the following minimum data or information: 1) Date of grant (white and green tickets), or date of repayment (yellow and pink ticket) of loan; 2) The rate to interest or yield, including service charges, if any, shall be shown on the lending tickets (white and green). The actual computation of the said interest must be shown on the repayment tickets (yellow and pink); and 3) Repayment tickets (yellow and pink) shall make reference to the date of the corresponding tickets recording grant of the loan. c. Transfer tickets shall be signed or authenticated by officers, whose names and specimen signatures are in the bank's/NBQB's list or book of Authorized Specimen Signatures, a copy or which shall be submitted to the Central; Accounting Department. d. The bank/NBQB whose account with the Central Bank is to be credited shall be responsible for making the necessary advice to the Central Bank of the transaction whether it be a grant or repayment of a loan, i.e., the loan advice tickets (white and green) shall be submitted to the Central Bank by the borrowing bank/NBQB, while the loan repayment tickets (yellow and pink) shall be submitted to the Central Bank by the lending bank/NBQB. (As amended by Section 2 of BSP Circular 88 dated October 4, 1995) SUBSECTION 1343.2 Accounting procedures a. Both banks/NBQBs shall immediately pass the corresponding entries in their books and, upon receipt of a copy of the transfer ticket duly stamped "RECEIVED" by the Central Bank, the borrowing bank/NBQB shall attach the same to the corresponding ticket debiting its Due from Central Bank account in its books and, in the case of the lending bank/NBQB, to the same ticket passed in its books on the day payment is made. (As amended by Section 3 of BSP Circular 88 dated October 4, 1995) b. All interbank loans shall be recorded by the borrowing bank/NBQB as "Bills Payable Interbank Loans" and shall be subject to required reserve requirements. c. All banks/NBQBs shall reconcile their demand deposit accounts with the Central Bank against Monthly Statements of Accounts to be furnished them by the Central Bank Accounting Department. Five copies of the reconciliation statement shall be submitted within ten (10) banking days from receipt of the Statement of Accounts from the Central Bank the original and three copies to the Central Bank Accounting Department and one copy to the appropriate supervising department. (As amended by Section 4 of BSP Circular 88 dated October 4, 1995) SUBSECTION 1343.3 Interest rate . The maximum rate of interest or yield, including commissions, premiums, fees and other charges, for inter-bank loan transactions shall be subject to pertinent provisions of law and regulations. SUBSECTION 1343.4 Call slips/tickets for 24-hour loans . Call slips or tickets may be used to evidence call loan transactions of not more than twenty-four hours maturity or to cover reserve deficiencies. In all other cases, call loan transactions shall be evidenced by a promissory note containing the minimum features prescribed in Subsec. 1281.3. SECTION 1344. (Reserved) . SECTION 1345. Supervised Credit . The following guidelines shall be observed by commercial and thrift banks in their supervised credit lending operations should they wish to avail themselves of the privilege of access to the credit facilities of the Central Bank. a. Definition Supervised credit is the timely extension of adequate credit accompanied by competent technical assistance. b. Concept Under the supervised credit system, the farmer-borrower agrees in writing that he will apply proven farm practices necessary to conserve the land, improve its fertility and increase its production, and abide by the approved farm plan and budget jointly prepared by him and a duly accredited supervised credit technician. It is a system of lending which combines adequate and timely credit with farm and home management guidance under a trained technician. c. Steps in Supervised Credit The steps involved in the supervised credit system of lending are the following: 1) Analysis of the project to be financed to determine the resources of the farm project, the necessary changes which must be made to make the farmer-borrower more productive and efficient, and the additional facilities and/or financing required to improve his operations; 2) Preparation of a farm plan and budget which shall include a farm schedule which sets down in specific terms the day-to-day farming activities of the farmer-borrower under modern cultural practices; 3) Releases of loan in accordance with the approved farm plan and budget; 4) Periodic inspection and follow-up of the project by the technician of the bank and/or of the government technician assigned to the bank to see to it that the farmer is operating strictly in accordance with the farm plan and budget and to provide the necessary technical assistance; and 5) Evaluation of the farm project at the end of the crop season or when such project has been completed to identify any problem that the farmer-borrower may have encountered during his operations to see to it that such problem is avoided in the next project. d. Requirement for Supervised Credit Technician The bank must hire as a member of its regular staff an agricultural credit production technician trained and duly accredited by the Central Bank, who shall be responsible in providing technical services to farmer-borrowers. However, the services of government production technicians may be temporarily utilized by the bank in case one of its own is not available. A trained agricultural credit production technician is authorized to supervise a maximum of 150 farmer-borrowers. SUBSECTION 1345.1 Crop insurance . All commercial banks, specialized government banks, savings banks and private development banks participating in the government's supervised credit system for palay production are advised of the creation of the Philippine Crop Insurance Corporation (PCIC) under Presidential Decree No. 1467 dated June 11, 1978, as amended by Presidential Decree No. 1733 dated October 21, 1980. The decree effected the transfer of the agricultural guarantee funds to the PCIC and it abolished the Agricultural Guarantee Fund Board. SECTION 1346. Peso Borrowings by Foreign Firms . A permanent Inter-Agency Committee composed of representatives from the Central Bank of the Philippines, the Board of Investments, the National Economic and Development Authority and the Ministry of Finance has been constituted to administer the policies, rules and regulations under which foreign companies in the Philippines may avail themselves of peso borrowings. SUBSECTION 1346.1 General principles and policies The Committee shall implement the regulations governing peso borrowings by foreign firms under the guiding principle that foreign companies operating in the Philippines are expected to bring in adequate capital and that peso borrowing for capital requirements should be maintained at reasonable levels. a. No bank or non-bank financial intermediary shall grant to, or maintain outstanding, peso loans of, a foreign firm except upon presentation of a valid certification by the Committee that the applicant foreign firm meets the guidelines embodied herein. Banks and non-bank financial intermediaries shall incorporate in their loan agreements with foreign firms covering loans with maturities beyond the validity date of the certification, a stipulation that the borrower shall renew the certification and that the failure of the borrower to obtain a renewed certification within thirty (30) days after the expiry dated thereof shall make the outstanding balance of the loan due and demandable. Foreign firms with peso loans maturing beyond the expiry dates of their certifications shall file with the Committee the necessary application for the renewal of such certifications, at least thirty (30) days before the expiry dates thereof. b. The certification shall be issued primarily on the basis of evidence that the applicant foreign firm meets the debt-to-equity ratio prescribed by the Inter-Agency Committee in accordance with the economic activity of the firm. c. Foreign firms availing themselves of foreign currency borrowings shall comply with pertinent Central Bank regulations. d. The provisions of this subsection and its implementing guidelines shall not apply to foreign banks and foreign-owned non-bank financial intermediaries with respect to their peso borrowings. The Monetary Board, upon recommendation of the Inter-Agency Committee, may exempt other foreign firms from the requirements of this subsection and the guidelines in meritorious cases. e. For purposes of this subsection, foreign firms are hereby defined to include (1) single proprietorships owned by non-Filipino citizens, (2) partnerships, more than forty per cent (40%) of whose capital is owned by non-Filipino citizens, and (3) corporations, more than forty per cent (40%) of whose total subscribed capital stock is owned by the non-Filipino citizens. f. The following sanctions shall be imposed for violation of these guidelines: 1) The wilful making of a false statement or any material misrepresentation in the application for certification or in the supporting documents shall be sufficient ground for the disapproval of the application or the revocation of the certification if the same has been issued, without prejudice to the institution of criminal action against the person responsible therefor as may be warranted under the circumstances. Such false statement or material misrepresentation shall also constitute as a sufficient ground for the denial of subsequent applications for certification filed by the foreign firm concerned; and 2) Any violation of the terms and conditions of the certification issued by the Inter-Agency Committee shall constitute a sufficient ground for the revocation of the certification and for the denial of subsequent applications for certification filed by the foreign firm concerned. SUBSECTION 1346.2 Requirements/conditions for availment of peso borrowings a. A foreign firm availing itself of peso borrowings shall observe at the time of borrowing, a debt-to-equity ratio determined by the Inter-Agency Committee. The debt-to-equity ratio shall take into account, among others, the firm's economic activity. Initially, the Inter-Agency Committee may be guided by the ratios and the corresponding classification as listed in Appendix 25. b. The debt-to-equity ratio shall be maintained the foreign firm as long as it has outstanding peso borrowings or for as long as it an outstanding valid certification. dctai c. Foreign firms whose total debt-to-equity ratio exceeds the ratio prescribed by the Inter-Agency Committee may be given reasonable time within which to meet such ratio or to adopt such alternative measures as the Inter-Agency Committee may prescribe. The Inter-Agency Committee, however, shall insure the gradual improvement of the firm's ratio through an annual build-up program, which initially may follow Appendix 26. The annual build-up program shall not be understood as allowing any deterioration of the total debt-to-equity ratio of the foreign format any time during the period of the program. A fused firm whose total debt-to-equity ratio exceeds the ratio prescribed by the Inter-Agency Committee and who has been given reasonable time within which to meet such ratio through the annual build-up program (following Appendix 26) as provided in the preceding paragraphs shall be issued certificates for peso borrowings provided that such foreign firm (1) has not declared/distributed dividends or profits and/or has not partially withdrawn capital after July 1, 1978 and (2) undertake or commit themselves not to distribute profits, earnings, declare dividends and/or partially withdraw capital during the validity or life of the certification or until such time when the prescribed debt/equity ratio has been attained. d. Export-oriented firms' total debt shall be net of an amount equivalent to one hundred per cent (100%) of the two (2) months average export earnings from non-traditional produces during the six (6) months immediately preceding the date of application. e. In the case of Philippine branch of a foreign firm, equity shall be in the form of assigned capital, which may be increased but shall not be reduced as long as the firm has outstanding peso borrowings. It is understood that for purposes of repatriating assigned capital, the pertinent Central Bank rules and regulations shall apply. SUBSECTION 1346.3 Exemptions a. The provisions of Subsecs. 1346.1 to 1346.5 shall not apply to foreign banks and foreign-owned non-bank financial intermediaries with respect to their peso borrowings. b. The Monetary Board, upon recommendation of the Inter-Agency Committee, may exempt other foreign firms from the requirements of Subsecs. 1346.1 to 1346.5 in meritorious cases. cdlex SUBSECTION 1346.4 Definition of terms . The terms used in Subsecs. 1346.1 to 1346.5 shall be understood as follows: a. "Foreign firms" shall refer to (1) single proprietorships owned by non-Filipino citizens, (2) partnerships, more than forty per cent (40%) of whose total capital is owned by non-Filipino citizens, and (3) corporations, more than forty per cent (40%) of whose total subscribed capital stock is owned by non-Filipino citizens. (As amended by BSP Circular 96 dated October 31, 1995) b. "Debt" shall refer to all types of liabilities as reflected in the balance sheet prepared in conformity with generally accepted accounting principles. However, in the case of inter-company accounts of foreign firms with their offices or branches abroad, payables shall be netted against receivables. c. "Peso borrowings" shall refer to credit in Philippine currency obtained from banks and other financial institutions. Any renewal or extension of peso borrowings shall be considered new peso borrowings and shall therefore, be subject to the requirements of Subsecs. 1346.1 to 1346.5 and these guidelines. Loans granted to foreign firms which are funded by moneys held by banks and non-bank financial intermediaries as trustee, are considered as peso borrowings within the purview of this section. These loans should thus be posted in the Schedule of Peso Borrowings of said firms as required under the terms and conditions their respective borrowing authority issued by the Inter-Agency Committee on Domestic Borrowings of Foreign Firms. d. "Equity" shall refer to the paid-in capital and retained earnings, whether appropriated or not. Appraisal surplus, however, shall not be considered in determining "Equity". e. "Assigned capital" shall refer to that amount specifically denominated as such, which is known to and duly registered with the Central Bank and/or with the Committee in accordance with the conditions and procedures with the Committee may prescribe. f. "Export-oriented firms" shall refer to firms certified as such in accordance with Central Bank regulations as well as other producers of non-traditional export products. g. "Non-traditional products" shall refer to export products identified as such by the Board of Investments. SUBSECTION 1346.5 Procedural requirements a. A foreign firm shall obtain a certification from the Inter-Agency Committee prior to obtaining peso borrowings, as provided for in Subsecs. 1346.1 to 1346.5. b. The certification to be used by the Inter-Agency Committee shall be to the effect that the application foreign firm may avail itself of peso borrowings up to the ceiling indicated therein under the provisions of Subsecs. 1346.1 to 1346.5. c. The certification shall be valid for one (1) year, unless sooner revoked by the Inter-Agency Committee by reason of any violation of the requirements of Subsecs. 1346.1 to 1346.5. For this purpose, quarterly financial statements shall be submitted by the firm to the Committee and such other documents as the Committee may deem necessary to monitor the firm's debt-to-equity ratio. d. For purposes of securing a certification, the documentary requirements shall include, but need not be limited to, the following: 1) Extent of foreign equity; 2) Statement of economic activity; 3) Latest financial statements; 4) Statement as to the amount of outstanding peso borrowings, if any, at the time of application; 5) In the case of branches, Central Bank certificate of assigned capital. 6) In the case of foreign firms whose total debt/equity ratio exceeds the ratio prescribed by the inter-Agency Committee: (a) evidence that applicant firm has not distributed profits/earnings, declared dividends and/or has not withdrawn capital after July 1, 1978; and (b) undertaking that applicant firm shall not distribute profits/earnings, or withdraw capital during the validity of the certification or until such time when the prescribed debt/equity ratio is attained. e. The Inter-Agency Committee may collect reasonable fees for every application filled. In the case of firms with cancelled certifications re-applying for new certifications, the Committee may collect a filing fee in an amount equivalent to twice the amount of the regular filing fee for applications for authority to borrow, in order to cover the cost of additional work involved in the closer monitoring of the errant firm's compliance with all pertinent requirements, rules and regulations, as well as its financial and operating reports. SECTION 1347. Domestic Stand-by Letters of Credit (L/Cs) . Domestic stand-by letters of credit may be issued or used in transactions other than those involving movement of goods under the following guidelines: a. The bank's obligation to pay shall be either unconditional (as against presentation of a clean draft) or conditional only upon the presentation of documents and not upon actual existence or non-existence of facts, i.e.,. the bank must not be called upon to determine disputed questions of fact or law; b. The bank's obligation shall be limited to a fixed maximum amount; c. The bank's obligation shall have an expressed expiration date; d. The stand-by letter of credit accommodation shall not violate, nor shall drawings against it result in violation of, any law or existing Central Bank directives, rules and regulations: Provided, however , That the total amount of the L/C to be opened shall not exceed an amount equivalent to fifteen per cent (15%) of net worth, and: Provided, further , That: (1) If the party who opened the L/C is a director, officer or stockholder of the issuing bank, the stand-by L/C accommodation shall not exceed an amount equivalent to the ceiling on such loans as provided under Section 83 of Republic Act No. 337, as amended, and implemented by Secs. 1330 and 1331, whichever is lower; and (2) Any amount in excess of the foregoing ceilings shall require the prior approval of the Central Bank. e. The party who opened the stand-by L/C or the ultimate borrower shall not have any past due obligation with the issuing bank for the 90-day period preceding the date of issuance of the L/C; f. Stand-by L/C, including those in favor of the Philippine Government to guarantee the performance/completion of vital government projects, may be issued only on a secured basis. Stand-by L/Cs may be secured by: (1) Real estate mortgage and/or bonds/securities either guaranteed or issued by the Central Bank or the National Government; (2) Other forms of collateral, such as hold-out on deposits or assignment of contract receivables Subject, however, to the prior approval of the Governor; (3) A second mortgage on real estate provided that the loanable value of such property is in excess of the first mortgage loan thereon and the excess is sufficient to cover the amount of the L/C under the second mortgage. g. Drawings shall be honored only upon failure of the party who opened the L/C (borrower) to pay the amortization(s) due and upon presentation of a written certificate to this effect; and h. The party who opened the L/C (borrower) must have an unqualified obligation to reimburse the bank on the same condition as the bank has paid. SECTION 1348. Committed Credit Line for Commercial Paper Issues . The following guidelines shall govern committed credit line agreements as a prerequisite for corporations proposing to issue commercial paper, pursuant to the New Rules on the Registration of Short-Term Commercial Paper (Appendix 18) issued by the Securities and Exchange Commission and approved by the Monetary Board. SUBSECTION 1348.1 Who may grant credit line facility . A bank with a net worth of at least P100 million, as defined in Item c of Subsec. 1116.4, may provide a committed credit line facility to a commercial paper issuer. As used in this section, the word bank shall refer to expanded commercial banks, commercial banks and thrift banks. The bank shall exercise proper caution to ascertain that the party in whose favor the credit line is to be established is capable of fulfilling his commitments to the bank under the credit line agreement, pursuant to Section 76 of the General Banking Act, as amended. A bank by itself or with other banks in a group of banks may enter into a committed credit line agreement with any corporation proposing to issue commercial paper. Where a group of banks is involved, a lead bank shall be designated from among themselves. SUBSECTION 1348.2 Aggregate commitment . The aggregate commitments under committed credit line agreements entered into by each bank pursuant to this section shall not exceed an amount equivalent to thirty per cent (30%) of its net worth, reckoned as of the date of execution of the latest agreement, provided that in no case shall a bank extend commitments to a single borrower for more than fifteen per cent (15%) of its net worth exclusive of other exposures to the said borrower. SUBSECTION 1348.3 Terms ; conditions ; restrictions The committed credit line agreement shall, as a minimum, incorporate the following terms, conditions, restrictions: a. That the credit line agreement is executed pursuant to the provisions of this section; b. That the bank or banks is committed to make available to the issuer funds equivalent to at least twenty per cent (20%) of the aggregate of the commercial paper issued and outstanding at any given time; c. That the commitment of the bank or banks shall be firm and irrevocable and effective for as long as the issues under a particular permit are outstanding, subject to renewal by the bank; d. That availments pursuant to the credit line agreement shall be for the exclusive purpose of meeting obligations arising from commercial paper issues in accordance with the provisions of the Rules on Registration of Commercial Papers, which availments shall be honored not earlier than three (3) banking days prior to the date of payment of obligation arising from outstanding commercial paper; e. That the request to avail of the credit line agreement shall be addressed to the bank or to the lead bank acting for a group of banks, which request shall be duly signed by a member of the board of directors and a senior ranking officer of the commercial paper issuer duly authorized for the purpose through an appropriate board resolution, which resolution shall also provide for the designation of the alternate signatories who shall likewise be a member of the board of directors and a senior financial officer of the corporation; and f. That the extent of the commitment of each participant in a group of banks under a credit line agreement shall be stipulated in the agreement. The commitment of the bank under the credit line agreement shall be a net risk to the bank and practices which will effectively reduce the risk or exposure of the bank, such as requiring the commercial paper issuer to maintain a compensating deposit with the bank, are hereby prohibited. SUBSECTION 1348.4 Reports to the Central Bank The bank or the lead bank, as the case may be, shall report to the Central Bank: a. All commitments entered into with commercial paper issuers within 10 banking days after the issuer shall have been authorized by the Securities and Exchange Commission. b. Any availment under the committed credit line agreement within 3 banking days from date of drawdown. SUBSECTION 1348.5 Loan limit . The liabilities of a commercial paper issuer to a bank arising from the availment by the issuer of the credit line agreement shall not be counted in determining compliance by the bank with the loan limit to a single borrower provided that in no case shall they exceed five per cent (5%) of the net worth of the bank beyond the normal applicable single borrower limit for a period of one hundred eighty (180) days from each availment of the credit line. SECTION 1349. Money Shop Loans . The following regulations shall govern money shop loans of commercial banks. a. Scope of lending operations . A money shop provide working capital or inventory financing to market stallholders, and stallholders and storeowners within 100 meters from the market perimeter. b. Eligible borrowers/co-makers . An applicant/co-maker for a loan must be of good moral character and integrity, must have good credit standing and capacity to pay off his debts and must have sufficient capital. c. Loan limits (1) Loans to be extended shall in no case exceed P10,000 per stallholder or stall-owner. (2) Loans for maintaining stocks-in-trade (groceries, textiles, etc.) shall not exceed 50% of actual inventory valuation while loans to replenish daily merchandise requirements such as vegetables, fish, carinderia, etc. shall not exceed 100% of the average daily investment. d. Terms, interests and charges . The maximum term of money shop loans shall in no case exceed 120 days and the rate of interest on such loans shall not exceed the rates provided in Sec. 1303. e. New loan and renewals . A loan granted to a stallholder or storeowner shall not be renewed until after 50% thereof shall have been paid. Likewise, if the ratio of total past due loans of the money shop exceeds 30% of the total outstanding loans, the total money shop loan portfolio at the time the past due ratio of 30% has been exceeded shall not be increased. For this purpose, a loan shall be considered past due where any installment remains unpaid for ten days or more. f. Other requirements (1) Amortization payments shall be on a periodic basis. (2) The officer, teller/collector and other accountable personnel of a money shop shall be adequately bonded. SECTION 1350. Loans to Rural Banks . The following guidelines shall govern the rediscount by the branches of the Philippine National Bank (PNB), the Land Bank of the Philippines (LBP) and the Amanah Bank (AB), for their own account, eligible papers of rural banks. a. Rural banks in the provinces of Cagayan, Isabela, Misamis Oriental, Misamis Occidental, Zamboanga del Norte and Zamboanga del Sur may rediscount their eligible papers with the following designated branches of the PNB and LBP: (1) Philippine National Bank (a) Zamboanga City Branch (Zamboanga del Sur) (b) Dipolog Branch (Zamboanga del Sur) (c) Pagadian Branch (Zamboanga del Norte) (d) Oroquieta Branch (Mis. Occ.) (e) Ozamis Branch (Mis. Occ.) (f) Gingoog Branch (Mis. Occ.) (g) Cagayan de Oro Branch (Mis. Or.) (h) Santiago Branch (Isabela) (i) Cauayan Branch (Isabela) (j) Ilagan Branch (Isabela) (k) Mallig Branch (Isabela) (l) Aparri Branch (Cagayan) (m) Tuao Branch (Cagayan) (n) Tuguegarao Branch (Cagayan) (2) Land Bank of the Philippines (a) Zamboanga City Branch (Zamboanga del Sur) (b) Cagayan de Oro Branch (Mis. Or.) (c) Cauayan Branch (Isabela) (d) Tuguegarao Branch (Cagayan) (3) Amanah Bank (list to be released later) provided that a rural bank may rediscount with only one of the branches indicated above. For this purpose, the rural bank concerned shall submit to the Department of Loans and Credit, Central Bank of the Philippines, the name of the bank where it intends to rediscount its eligible papers. b. This rediscounting privilege shall be governed by the Rediscounting Guidelines for Rural Banks as amended, particularly the following: (1) The rural bank is not suspended by the Governor/Monetary Board from receiving all forms of financial assistance from the Central Bank; (2) It has not exceeded its credit limit which is the sum of 300% of its networth plus 300% of average savings and time deposit liabilities for the last four (4) months immediately preceding the date of its application; (3) Its capital accounts must not be less than 10% of its risk assets; (4) Its investment in bank premises (building, lot and leasehold improvements) must not exceed 35% of its networth less preferred shares while for furniture, fixtures and equipment (including transportation equipment) total investments must not exceed 15%; (5) Its past due loans (including items in litigation) must not be more than 25% of its total portfolio; (6) It is not deficient in its available reserves against the required reserves on deposit liabilities; (7) It has no past due loans or collateral deficiencies in the form of unremitted collections/matured notes; and such other regulations/policies which may be promulgated from time to time by the Monetary Board/Governor; c. The loan values, rediscount rates and lending rates shall be in accordance with those prescribed under existing regulations. d. The Participating institutions (PNB, LBP and AB) may secure advances from the Central Bank against the rural banks' own promissory notes and the corresponding collateral promissory notes of rural banks' borrowers at 100% loan value of such outstanding obligations; e. Advances that may be granted by the Central Bank to PNB, LBP and AB under this scheme shall be assessed interest at the rate of 1% p.a. and 6% p.a. for loans under the supervised credit and non-supervised credit schemes, respectively, while PNB, LBP and AB shall accordingly charge the rural banks 3% and 8%, respectively; f. The maturity of the advances shall not exceed 360 days; and g. The demand deposit accounts of PNB, LBP and AB with the Central Bank shall be debited as their own promissory notes or the collateral promissory notes of rural banks mature. F. SPECIAL FINANCING PROGRAMS SECTION 1351. Industrial Guarantee and Loan Fund (IGLF) Program . The following rules and regulations shall govern the grant of loans under the IGLF program. SUBSECTION 1351.1 Accreditation system . Under the accreditation scheme, eligible commercial and thrift banks and non-bank financial intermediaries which qualify under the IGLF accreditation program shall be solely responsible for the evaluation and approval of applications for IGLF financing. a. General procedure (1) Commercial and thrift banks may apply for accreditation with the Industrial Guarantee and Loan Fund (IGLF). (2) All applications for accreditation shall be in the prescribed form and shall be filed in quadruplicate with the Department of Loans and Credit, Central Bank of the Philippines. (3) As IGLF Administrator for NEDA, the Central Bank (Department of Loans and Credit) shall evaluate applications for accreditation in accordance with the criteria mentioned in Item b below, (4) The Central Bank's Department of Loans and Credit shall communicate to the applicant commercial bank the action taken by the Governor/Senior Deputy Governor on its application for accreditation, copy furnished NEDA. b. Accreditation criteria for commercial and thrift banks The accreditation criteria for participating banks under the IGLF scheme consist of compliance with the following requirements in addition to the Central Bank's normal criteria for credit availment: 1) Minimum paid-in capital; 2) Sound and efficient management and an adequate number of qualified staff to carry out the institution's normal business; 3) Capability for satisfactorily appraising the technical, marketing and financing viability of small industry projects together with satisfactory systems and procedures for regularly following up on the progress of project implementation and operation; 4) An overall level of arrearages (amounts over four months overdue) of no more than 15% of the total outstanding loans of the institution. In any financial year, actual collections would be no less than 70% of amounts overdue and amounts falling due in that financial year as applied to the IGLF loan portfolio only; and 5) Non-arrearages with the Central Bank/IGLF. It is understood that a duly accredited bank shall at all times meet the foregoing criteria. c. Guidelines for loan evaluation The accredited sponsoring banks should follow all the policies, guidelines and procedures set by the IGLF in the evaluation and approval of loan applications. d. Release of funds Upon submission of the required documents and other papers by an accredited bank, an initial 50% of the total amounts for approved project(s) shall be released to form of Special Time Deposit by the Central Bank. The remaining 50% shall be released to the accredited bank upon submission of evidence of disbursement of the initial funding to the borrowers, in accordance with the purposes for which the IGLF facility is secured. However, requests for releases by a duly accredited bank may be held in temporary abeyance by the Central Bank in case of non-compliance with any of the foregoing criteria. This accommodation does not apply to straight guarantee scheme, which is subject to prior approval by the IGLF Review Committee. e. Post audit The Central Bank's Department of Loans and Credit shall undertake the post-audit (end-use verification survey) of IGLF-assisted projects on a periodic basis and submit the corresponding reports to the IGLF Review Committee. The sponsoring bank shall see to it that the Special Time Deposit shall be used exclusively for the purposes for which the loan was granted. Loan diversion shall constitute sufficient cause for the automatic immediate withdrawal of the Special Time Deposit by the IGLF Review Committee. f. Limit on loans In order to comply with the objectives of industrial dispersal, it shall be required that during a 6-month period, an accredited bank shall channel to rural areas (outside Metro Manila) a minimum of 60% of the total amount of approved applications. SUBSECTION 1351.2 IGLF loans to small industries The following rules and regulations shall govern the availment by duly accredited commercial and thrift banks and non-bank financial intermediaries of special time deposit/deposit substitutes under the IGLF Program. a. Eligible projects Projects eligible for IGLF financing shall include: 1) Projects of manufacturing industries enumerated in Appendix 27, and 2) Tourist inns outside Metro Manila Area with the required indorsement/certificate from the Ministry of Tourism: Provided , That the total assets of the prospective IGLF grantee shall not exceed P1 million as of the date of application. b. Purpose of financing The IGLF facility which should not exceed P500,000 may be utilized for any or a combination of the following purposes: 1) Working capital requirements; 2) Fixed assets costs, such as the acquisition of factory site, which shall be strictly on a case-by-case basis, building construction and improvements, purchase of machinery, equipment or spare parts and installation costs. c. Papers required 1) The application of an accredited bank for initial release (50% of amount approved) against an approved project shall be filed in duplicate with the Industrial Loans Division (IGLF Unit), Department of Loans and Credit, Central Bank, together with the following supporting papers: cdlex a) A certification that both the borrower-firm and the project being financed meet the eligibility requirements of IGLF and that the approved loan have been processed/evaluated in accordance with IGLF rules and regulations. b) Original and two (2) copies of Deed of Undertaking (assurance of Peso Payment) duly; accomplished and signed by an authorized officer of the financial institution. c) Original and three (3) copies of Guarantee Agreement, duly accomplished and signed by an authorized officer of the financing institution with its seal affixed thereto as indicated in the Agreement. d) Borrower-firm's request for release of the approved IGLF facility duly endorsed by the applicant financing institution. e) Whenever applicable, an insurance policy on the life of the proponent (single proprietor) in an amount equal to 60% of the approved loan, duly endorsed/assigned in favor of the CBP-IGLF. (This is required where the applicant is a single proprietorship and the approved loan is P100,000.00 or more.) This insurance requirement is optional rather than mandatory on the part of the borrower. f) Certification on non-arrearages with the DBP, PNB, GSIS and SSS on behalf of the following: For single proprietorship the proprietor Partnership the partnership and all partners Corporation the corporation, officers and directors The certifications may be issued by the agencies or may be in the form of a sworn statement executed by the aforementioned parties. g) Certificate of Time Deposit corresponding to the amount released signed by authorized officer(s) of the financial institution. Separate certificates shall be submitted for the working capital and fixed asset portion of the approved loan. 2) The subsequent application of the accredited financial institution for the final release (balance of 50%) against an approved project shall be supported by the following: a) A duplicate of the borrower-firm's promissory note covering the initial release; b) A copy of the corresponding credit advice/memo or check stub evidencing release to the borrower-firm of the initial funding from IGLF; and c) Certificate of Time Deposit covering the final release of the 50% balance signed by authorized officer(s) of the financial institution. d. Criteria for project evaluation The criteria in the evaluation of projects shall be as follows: 1) Project feasibility It must be economically, technically and financially feasible. 2) Foreign exchange earnings/savings It should contribute to the reduction of trade imbalance through the manufacture of export products and the utilization of indigenous raw materials. 3) Regional dispersal Priority shall be given to industries located outside Metro Manila. Only expansion and new export-oriented projects within the Metro Manila Area will qualify. 4) Employment generation Priority shall be given to projects which are labor-intensive. 5) Equitable distribution of income To spread the benefits of IGLF financing to as broad a base as possible, the prospective IGLF grantee shall not be a shareholder of another IGLF beneficiary firm(s). Where the project is a spin-off or subsidiary of another firm(s), the combined assets should not exceed P1 million. 6) Compliance with existing requirements of other government agencies, e.g., pollution control. The prospective borrower shall have complied with all the requirements in connection with the project to be financed. e. Debt-equity requirement The maximum amount of financing that may be extended shall not exceed 80% of the total long-term debt (inclusive of the amount applied for) and equity of the applicant-firm such that the resulting debt-equity ratio would be 80:20. f. Maturity period The Special Time Deposits shall have maturities not exceeding three (3) years for working capital and ten (10) years for fixed assets. For new projects, special time deposit loans for working capital and fixed assets shall have a grace period of one (1) year and two (2) years, respectively, in payment of principal amortization inclusive of the approved term. g. Interest Rate/Loan Ceiling . Effective November 1, 1984, the new interest rates/policy change governing the operations of the Industrial Guarantee and Loan Fund (IGLF) shall be as follows: A. Cottage and Interest Rates Small Industries 1. From IGLF 16% p.a. to Accredited Institutions 2. From Accredited 23% p.a. inclusive of Institutions a service charge of to End-Users 1.5% p.a. B. Medium Industries 1. From IGLF 18% p.a. to Accredited Institutions 2. From Accredited 23% p.a. inclusive of Institutions to a service charge of to End-Users 1.0% p.a. The maximum loan ceiling for cottage/small industries is fixed at P2.0 million. ( Effective October 19, 1984 ) h. Guarantee coverage 1) All IGLP Special Time Deposits availed of shall be covered by an automatic 60% guarantee for which a guarantee fee of 2% per annum shall be assessed, in addition to interest. The guarantee fee shall be equal to 2% of 60% of the outstanding balance, per annum, payment of which shall follow the schedule of payments on principal and interest. The financial institutions may pass on to its borrowers the 2% guarantee fee. 2) Straight guarantee of industrial loans for projects eligible under the IGLF program may be allowed up to a maximum of 80%, subject to approval by the IGLF Review Committee. The guarantee fee shall be equal to 2% of the approved guarantee coverage. i. Amortization payments Accredited financial institutions shall submit a schedule of equal amortization payments (principal and interest) computed on a quarterly basis. j. Releases on approved IGLF facility All amounts released to accredited financial institutions shall immediately be released to the project proponent and no part thereof shall be retained in the form of deposits/compensating balances. k. Service charges The maximum charges, including commissions, premiums and service fees other than interests and guarantee fees, regulation fees, mortgage redemption insurance, documentary and science taxes and similar expenses that financial institutions may collect on loans granted under the program shall be as follows: 1) Charges on the loan principal which shall be collected only once and only upon the full releases of the loan shall not exceed the following rates: Over P250,000 1-% P250,000 and below 1% 2) On the second year and every year thereafter, and for as long as the loan or any portion thereof remains unpaid, a service fee on the outstanding balance may likewise be collected in accordance with the following schedules: Over P250,000 P200.00 Over P100,000 to P250,000 100.00 P100,000 and below 50.00 l. Default in amortization payments A financial institution is considered in default upon failure to pay the amortization on its IGLF special time deposits as they fall due. In case; of default, its demand deposit account with the Central Bank and/or its duly designated depository bank shall be debited for the equivalent amount in default, plus the corresponding interests and guarantee fees due thereon, provided that such debit shall not result in overdrawings; otherwise, the financial institution binds itself to remit directly to the Central Bank the total amount due. Failure to remit the amortization(s) due within a specified period may temporarily disqualify the financial institution from availing itself of the privilege of access to the rediscounting facilities of the Central Bank subject to approval of the Monetary Board and/or participating in the IGLF Program. m. Violations by the financial institution/IGLF grantee Any violation or infraction of these regulations, including loan diversion and misrepresentation in the application, will serve sufficient basis for the recall of the special time deposit within thirty (30) days from receipt of notice and/or to the imposition of administrative sanctions as provided for under existing laws, rules and regulations insofar as these are applicable. n. Supplementary rules The Central Bank now from time to time issue additional rules and regulations to supplement, complement or amend rules and regulations as may be initiated by the National Economic Development Authority. SUBSECTION 1351.3 IGLF loans to medium-scale industries . All duly accredited commercial and thrift banks and non-bank financial intermediaries may grant IGLF loans to medium-scale industries not exceeding P500,000. The total amount of loans an institution can grant to medium-scale industries shall not, however, exceed the total IGLF loans granted to small scale industries in the preceding twelve (12)-month period. a. Eligible projects Projects eligible for financing shall include non-traditional export manufacturing industries as defined by the BOI and CB's Export Department provided that: 1) Total assets must not exceed P4 million as of the date of application; 2) New projects located within the Metro Manila Area must comply with the requirements of the National Pollution Control Commission (NPCC); and 3) The Project is a labor-intensive enterprise that employs at a ratio of one (1) worker for every thirty thousand (P30,000) pesos or less of its total assets. b. Purpose of financing The IGLF facility which should not exceed P500,000 may be utilized for any or a combination of the following purposes: 1) Working capital requirements; 2) Fixed assets costs, such as the acquisition of factory site, which shall be strictly on a case-by-case basis, building construction and improvements, purchase of machinery equipment or spare parts and installation costs. c. Papers required 1) The application (CB-DLC-IGLF Form Nos. 1-A, 1-B and 2-A) of an accredited bank for initial release (50% of amount approved) against an approved project shall be filed in duplicate with the Industrial Loans Division (IGLF Unit), Department of Loans and Credit, Central Bank, together with the following supporting papers: a) A certification that both the borrower firm and the project being financed meet the eligibility requirements of IGLF and that the approved loan have been processed/evaluated in accordance with IGLF rules and regulations; b) Original and two (2) copies of Deed of Undertaking (assurance of Peso Payment) duly accomplished and signed by an authorized officer of the financial institution (CBP-DLC-IGLF Form Nos. 3-A and 3-B). c) Original and three (3) copies of Guarantee Agreement (CB-DLC-IGLF Form No. 4) duly accomplished and signed by an authorized officer of the financing institution with its seal affixed thereto as indicated in the Agreement; d) Borrower-firm's request for release of the approved IGLF facility duly endorsed by the applicant financing institution; e) Certification on non-arrearages with the DBP, PNB, GSIS and SSS on behalf of the following: For single proprietorship the proprietor Partnership the partnership and all partners Corporation the corporation, officers and directors The certification may be issued by the agencies or may be in the form of a sworn statement executed by the aforementioned parties. f) Certification of Time Deposit or Certification of Assignment with Recourse corresponding to the amount released signed by authorized officer(s) of the financial institutions. Separate certificates shall be submitted of the working capital and fixed asset portion of the approved plan. 2) The subsequent application (CB-DLC-IGLF Form No. 2-B) of the accredited financial institution for the final release (balance of 50%) against an approved project shall be supported by the following: a) A duplicate of the borrower firm's promissory note covering the initial release. b) A copy of the corresponding credit advice/memo or check stub evidencing release to the borrower of the initial funding from IGLF. c) Certificate of Time Deposit or Certificate of Assignment with Recourse covering the final release of the 50% balance signed by authorized officer(s) of the financial institution. d. Criteria for Project Evaluation The criteria in the evaluation of projects shall be as follows: 1) Print feasibility It must be economically, technically and financially feasible; 2) Foreign exchange earnings/savings It should contribute to the reduction of trade imbalance through the manufacture of export products and the utilization of indigenous raw materials; 3) Regional dispersal Priority shall be given to industries located outside Metro Manila; 4) Projects must be labor intensive with a minimum capital/labor ratio of P30,000; 5) Equitable distribution of income To spread the benefits of IGLF financing to as broad a base as possible, the prospective IGLF grantee shall not be a shareholder of another IGLF beneficiary firm(s). Where the project is a spin-off or subsidiary of another firm(s), the combined assets should not exceed P4 million; 6) Compliance with existing requirement of other government agencies, e.g., pollution control. The prospective borrower shall have complied with all the requirements in connection with the project to be financed. cdlex e. Debt-equity requirement The maximum amount of financing that may be extended shall not exceed 80% of the total long-term debt (inclusive of the amount applied for) and equity of the applicant-firm such that the resulting debt-equity ratio would be 80:20. f. Maturity period The Special Time Deposit shall have maturities not exceeding three (3) years for working capital and ten (10) years for fixed assets. STD loans for working capital and fixed assets shall have a grace period of one (1) year and two (2) years, respectively, in payment of principal amortization inclusive of the approved term. g. Interest rate IGLF Special Time Deposits in favor of financial institutions shall be assessed interest at seven per cent (7%) per annum with a maximum spread of five per cent (5%) per annum, such that the interest which shall be charged by the lending bank for IGLF loans to its borrowers shall not exceed twelve per cent (12%) per annum. Discounting of interest is not allowed. h. Guarantee coverage 1) All IGLF Special Time Deposits availed of shall be covered by an automatic 60% guarantee for which a guarantee fee of 2% per annum shall be assessed, in addition to interest. The guarantee fee shall be equal to 2% of 60% of the outstanding balance, per annum, payment of which shall follow the schedule of payments on principal and interest. The financial institutions may pass on to its borrowers the 2% guarantee fee; 2) Straight guarantee of industrial loans for projects eligible under the IGLF program may be allowed up to a maximum of 80%, subject to approval by the IGLF Review Committee. The guarantee fee shall be equal to 2% of the approved guarantee coverage. i. Amortization payments Accredited financial institutions shall submit a schedule of equal amortization payments (principal and interest) computed on a quarterly basis. j. Release on approved IGLF facility All amounts released to accredited financial institution shall immediately be released to the project proponent and not part thereof shall be retained in the form of deposits/compensating balances. k. Service charges The maximum charges, including commissions, premiums and service fees other than interests and guarantee fees, regulation fees, mortgage redemption insurance, documentary and science taxes and similar expenses that financial institutions may collect on loans granted under the Program shall be as follows: 1) Charges on the loan principal which shall be collected only once and only upon the full releases of the loan shall not exceed the following rates: Over P250,000 1-% P250,000 and below 1% 2) On the second year and every year thereafter, and for as long as the loan or any portion thereof remains unpaid, a service fee on the outstanding balance may likewise be collected in accordance with the following schedules: Over P250,000 P200.00 Over P100,000 to P250,000 100.00 P100,000 and below 50.00 l. Default in amortization/payments A financial institution is considered in default upon failure to pay the amortization on its IGLF special time deposits as they fall due. In case of default, its demand deposit account with the Central Bank and/or its duly designated depository bank in default, plus the corresponding interest and guarantee feed due thereon, provided that such debit shall not result in overdrawings; otherwise, the financial institution binds itself to remit directly to the Central Bank the total amount due. Failure to remit the amortization(s) due within a specified period may temporarily disqualify the financial institution from availing itself of the privilege of access to the rediscounting facilities of the Central Bank subject to approval of the Monetary Board and/or participating in the IGLF Program. m. Violations by the financial institution/IGLF grantee Any violation or infraction of these regulations, including loan diversion and misrepresentation in the application, will serve as sufficient basis for the recall of the special time deposit within thirty (30) days from receipt of notice and/or to the imposition of administrative sanctions as provided for under existing laws, rules and regulations insofar as these are applicable. n. Supplementary rules The Central Bank may from time to time issue additional rules and regulations to supplement, complement or amend rules and regulations as may be initiated by the National Economic and Development Authority. SECTION 1352. Masagana 99 and Masaganang Maisan . The following rules shall govern the grant of loans under this program. SUBSECTION 1352.1 Coordinating Masagana Program agencies . The Masagana program is coordinated as follows: a. National Level The Masagana program is coordinated by the NFAC National Management Committee (NMC) composed of representatives from government and private entities. This Committee takes charge of designing operational strategies to be adopted and formulates guidelines in solving major problems in the process of program implementation. b. Provincial Level At the provincial level, Masagana program is coordinated through the Provincial Action Committee (PAC) headed by the Provincial Governor. The Vice-Chairman is the Provincial Program Officer (PPO) who is responsible in monitoring the provincial program. The members are the PC Commander, provincial heads of BPI/BAEx, ACA, DLGCD, (now MLGCD), PNB, NGA (now NFA), representatives from the banks, millers, traders, fertilizer/pesticide suppliers, Central Bank, DAR (now MAR), etc. c. Municipal Level At the municipal level, the Masagana program is coordinated by the Municipal Action Committee (MAC) headed by the Mayor and Agricultural Credit Production Technician as Co-Chairman. The members are representatives from the banks, barangay captains and production groups' leaders. SUBSECTION 1352.2 Lending policies and procedures a. Lending policies 1) Eligible borrowers A farmer with a leasehold contract, a farmer who is a member of a cooperate samahang nayon, selda/damayan, a beneficiary of agrarian reform or landowner-cultivator. 2) Purpose of the loan The kinds of loans which may be granted under the short term supervised credit program that are rediscountable at preferential terms, are as follows: a) Rice production b) White corn and feed grains production 3) Amount and size of loan The amount and size of loan depends on the actual needs and viability of the project to be financed and capacity of the borrowers to repay the loan. However, if the farmer-borrower is a member of the samahang nayon, an amount equivalent to three per cent (3%) of his total loan shall be deducted by the bank to cover his contribution to the Barrio Savings Fund. 4) Security of the loan The loans granted may be secured by any or a combination of the following: a) Real estate if available; b) Chattel mortgage on standing crops, existing poultry or livestock or the object of financing; c) Stored crops in bonded warehouses; d) Co-makers acceptable to the bank; e) Selda/damayan members as co-makers; and f) Other collateral acceptable to the bank, such as, but not limited to machinery or work animals, etc. 5) Interest rate to end-users Production loans shall be charged at maturity an interest not to exceed the rate provided for in Sec. 1271. 6) Repayment of loans After threshing and cleaning of the crop financed by the loan, the borrower shall deposit at his expense with the warehouse designated by the bank (which may be an NGA-designated collection center or an NGA-operated or designated warehouse) that portion of the harvest in payment of his obligation in the name of the bank but for the borrower's account. The computation of the portion of the harvest equivalent to pay the borrower's loan obligation shall be based on the current market price or government-support price, whichever is higher. Between the date of harvest and the date of maturity of the borrower's promissory note, the borrower shall have the authority to sell or otherwise dispose of the portion of the borrower's harvest belonging to the bank (whether in his possession or deposited in a warehouse as provided for above) at the price acceptable to the bank and to turn over to said bank all proceeds of such sale to the extent of the amount due the bank under the loan; any excess from said sale shall belong to the borrower but any deficiency shall likewise continue to be the borrower's obligation to the bank; should no sale or other disposition materialize on the date of maturity of the note, the bank may sell said produce deposited in the warehouse and apply the proceeds of the payment to the borrower's loan account, the consequences of excess or deficiency being as provided for above. 7) Guarantee feature For a premium of one per cent (1%) of the loan amount, the Land Bank of the Philippines guarantees any loss that may be incurred by a participating lending institution due to non-collection of the loans granted to farmer-borrowers under Masagana 99 and Masaganang Maisan as a result of destruction of the crops financed due to or as a result of force majeure . The provisions and procedures on loan guarantee are prescribed in the implementing guidelines set forth by the Land Bank of the Philippines (Guarantee under the Agricultural Guarantee Fund replaced by crop insurance). b. Lending procedure (1) Individual or group lending (a) Individual borrowers who can put up the necessary collateral may be granted loans without co-makers. In case of borrowers who have no acceptable collaterals, a group of closely-knit farmers within a samahang nayon may form themselves into a selda/damayan with one of them acting as production leader. The number of members to compose the selda will be left to the discretion of the bank manager and the agricultural credit production technician but should not be less than two (2) and not more than fifteen (15) farmer-borrowers. This production leader acts in behalf of the members in transacting with the bank and other parties concerned. The selda/damayan members are jointly and severally liable for any loan obtained by any one member from the participating bank. (b) A farmer gets a Certification of Identity from the barangay captain. (c) A farmer with the assistance of the production technician prepares his farm plan and budget according to his actual credit needs. (d) The farmer applies for a loan with the bank bringing with him the accomplished application form, farm plan and budget, purchase order or chit issued by the technician for the input portion of the loan, together with the Certification of Identity issued by the barangay captain leader. (2) Release of loans . To facilitate loan documentation in case of non-collateralized group lending, only one set of promissory note is executed by the selda/damayan members. The proceeds of the loan is released to the borrowers on staggered basis in accordance with the farm plan and budget. (3) Supervision of projects by the agricultural credit production technician (a) The technician shall supervise the project from the time the loan was released until maturity date. (b) The production technician checks with the bank the obligations of farmer- borrowers under his supervision and reminds them of the due dates of their loans. (c) The technician reports to the bank the harvesting activities of farmer-borrowers under his coverage. Immediately after threshing, the technician shall again report to the bank the value of harvest of individual borrowers. (4) Evaluation of farm projects after the end of the crop season . The technician evaluates the projects after the end of the crop season to determine the problems encountered by the farmer-borrowers in order to formulate recommendations and solutions to improve the borrower's farming operation. SUBSECTION 1352.3 Incentive allowance to government agricultural credit production technician by the lending institutions . In case government technicians are detailed with the lending institutions to supervise the farm projects of farmer-borrowers, they shall be allowed to receive from the banks additional incentive allowance for services rendered under the following conditions: a. For the duration of the loan fifty centavos (P0.50) per month or a maximum of P3.00 for every farmer supervised under the Masagana 99 program and P2.50 for Masaganang Maisan. b. Six pesos (P6.00) upon full payment of the Masagana 99 loan on or before maturity date; six pesos and fifty centavos (P6.50) upon full payment of Masaganang Maisan loan on or before maturity date. c. There shall be a one peso (P1.00) deduction from the six pesos (P6.00) under Item (b) for every month the loan is past due. d. In no case, however, shall the technicians receive less than three pesos (P3.00) on the fourth month that the loan is past due or thereafter when the loan is fully paid. This also covers restructured loans. SUBSECTION 1352.4 Use of purchase orders or chits for the input portion of the loan to be extended to former borrowers a. Purchase orders or chits The bank shall print sufficient copies of purchase orders or chits according to target area assigned to it. b. Routing of the purchase order or chits (1) The technician fills out and issues chits to farmer and retains technician's copy of the chit. The farmer submits the chits together with the application, farm plan and budget and certificate of identity to the bank for approval. (2) The bank processes and approves/disapproves the loan application. The bank stamps seal on signed chits and gives the bank's and dealer's portions of the chits to the farmer. (3) The farmer takes the dealer's and bank's portion of the chit to the dealer. (4) The dealer issues inputs and the borrower signs dealer's copy of the chit. The dealer keeps copy of the sales invoice and chit. The dealer presents the bank's and dealer's portion of chit and sales invoice to the bank and keeps dealer's copy for audit purposes. c. Liquidation of services chits (1) The accredited dealers for fertilizers and chemicals and also the Bureau of Plant Industry seed inspector summarizes weekly their respective chits served during the week. The summary: together with the invoice and delivery receipts should be submitted to the bank for payment. (2) The chits, invoice and/or delivery receipt shall be retained and filed by the bank for audit purposes. Under the Masagana 99 Program and as directed by the President of the Philippines, the Philippine National Bank shall give priority to all area marketing cooperatives (AMCs) in servicing purchase orders or coupons for fertilizer and agricultural inputs of farmer-borrowers who are members of samahang nayons (SN). SUBSECTION 1352.5 Valuation reserves for doubtful and loss loan accounts a. Valuation reserves equivalent to fifty per cent (50%) of loan accounts considered as "doubtful" of collection shall be set up subject to adjustment at the end of each year and/or prior to any declaration of dividends. Loan accounts which on the basis of existing circumstances render their collection or liquidation in full highly improbable shall be classified as "doubtful". These types of loans may include, among others, any of the following: (1) Loans under litigation (excluding portion covered by Land Bank guarantee); (2) Loans which are past due for six (6) months and efforts to collect even the interest due have failed; (3) Restructured loans which have matured and have not been renewed, and efforts to collect even the interest due have failed; (4) Past due loans secured by collaterals which have declined in value without the borrower offering sufficient additional collateral for the loans, coupled with the weakened financial condition of the borrower; (5) Past due loans secured by mortgage on real estate, the title to which is subject to an adverse claim rendering settlement of the loans through foreclosure doubtful; and (6) Other loans which are current but have become doubtful of collection due to crop failure/unfavorable results of operations of the project financed. b. Valuation reserves equivalent to one hundred per cent (100%) of loan accounts considered "uncollectible or worthless or loss" shall be set up and adjusted at the end of each year and/or prior to any declaration of dividends. These types of loans may include, among others, any of the following: (1) Loans which are past due, the interest of which are unpaid for a period of six (6) months and not in process of collection; (2) Loans previously categorized for the past six (6) months as "doubtful" of collection and without any payment of interest and/or reduction of principal; or (3) Loan wherein the borrower and/or his co-maker(s) are insolvent, and if secured, the collaterals thereof are considered worthless. SUBSECTION 1352.6 Financing by PNB of direct seeding scheme for rainfed areas under Masagana 99 . As part of the "Masagana 99 Rice Production Program", the National Food and Agriculture Council (NFAC) is presently initiating a rice planting program for rainfed areas using the direct seeding method ( Sabog Tanim ) which eliminates the necessity of seed bed preparation and seedling transplanting. The Central Bank, as member of the NFAC, is cooperating in this effort by providing part of the financing through the Philippine National Bank and the rural banking system. a. The Scheme . Essentially, this scheme (1) involves land preparation starting as early as November, December or January while the soil is still moist (2) planting thru direct broadcast of seeds in lieu of transplanting the seedlings immediately after the first rains in May or June. This project would cover rainfed areas involving around 50,000 hectares in eleven selected provinces (Ilocos Norte, Ilocos Sur, La Union, Pangasinan, Tarlac, Nueva Ecija, Pampanga, Bulacan, Camarines Norte, Camarines Sur, and Iloilo). Harvests are expected to coincide with the lean months of July, August and September. As usual, the scheme will follow the recommended package of technology in rice production consisting of high yielding seed varieties, fertilizers pesticides, herbicides and credit to be made available to selected farmer-cooperators who would be closely supervised by the production technicians of the government and lending institutions who are in turn supervised by the Central Bank technicians. Specific areas and technicians will be designated by NFAC's Provincial Program Officers. b. Financing . The amount required to finance the first phase of the scheme shall be released to farmer-borrowers at P200 per hectare from November or December up to the early part of February for the preparation of the land. The promissory notes for this initial release will have a maturity period of nine to ten months. Special time deposits (STDs) may be granted to rural banks for this purpose with a maturity of three months to be repaid out of the rediscounting of the aforementioned promissory notes. The amount to be utilized exclusively for direct rice seeding and the corollary needs during the months of May and June shall be released to cooperators at P700 per hectare in the form of loans whose maturity will be coterminous with the initial release for land preparation. Special time deposits may also be granted to rural banks which again would be repaid out of rediscounting of the loans generated from said STDs, provided the STDs for land preparation are already repaid. The Philippine National Bank may use its own funds or rediscount with the Central Bank to generate funds for this purpose, subject to existing rules and regulations on rediscounting. c. Loan limit . Banks participating in the Sabog-Tanim shall release, beginning January 1975, the required loans to farmers in an amount not exceeding P1,600 per hectare. SUBSECTION 1352.7 Guarantee payments of Masagana 99 arrearages . The following regulations shall govern the implementation of Letter of Instructions No. 1242 dated May 21, 1982 providing a measure to facilitate guarantee payments of Masagana 99 arrearages: a. Statement of policy/objectives . To restore the good credit standing of banks with the Central Bank of the Philippines (CB) and to regain their capability to render financial services to the rural communities and thus enable them to continue their participation in the supervised credit program, the Philippine National Bank (PNB) and rural banks may avail themselves of guarantee payments on their past due Masagana 99 loans from a special revolving trust fund constituted from national budgetary release and administered by the Philippine Corp Insurance Corporation (PCIC), as provided under Letter of Instructions No. 1242. b. Definition of coverage . Guarantee payments shall cover eighty-five percent (85%) of farmer's past due Masagana 99 loans with PNB and rural banks which are (1) past due for three years or more as of date of effectivity of the LOI; and (2) not previously subject of claims payments and/or advances under the Agricultural Guarantee Fund. c. Qualification requirements . The Philippine National Bank and all rural banks with eligible M-99 arrearages covered by Item "b" hereof may qualify for guarantee payments, except those banks which are under receivership or those which have committed serious irregularities. d. Application for guarantee payment The PNB and rural banks concerned shall file an application with the PCIC, thru the Central Bank, in the prescribed form with the following documents: 1) Resolution of the Board of Directors authorizing the bank to avail itself of guarantee Payments under this subsection; 2) A list negligible loans for guarantee payments as defined in Item b hereof certified under oath by the president or other duly authorized officers office lending institution, and favorably endorsed by the Central Bank; 3) A deed of undertaking to submit within a reasonable time the farmers' restructured loans subject of the claim for guarantee payment; 4) Such other documents as may be required by the PCIC and Central Bank. e. Schedule of releases . The PCIC shall release to PNB and to the rural banks (thru the Central Bank) such amounts not exceeding 85 per cent of loans subject of claims for guarantee payment according to the following schedule: Year 1 25 per cent of eligible loans Year 2 30 per cent of eligible loans Year 3 30 per cent of eligible loans f. Restructuring of farmers' loans 1) The principal amount and accrued interest of eligible M-99 loans of farmers, exclusive of penalties and other charges shall be consolidated and restructured over a period of five (5) years. Thereafter, no interest and penalty charges shall be imposed on the restructured loans. 2) Where, for one reason or another, restructuring of loans is not possible, the bank shall submit a list of these accounts together with the reasons or justifications for non-restructuring, certified and attested to by authorized barangay officials. g. Application of collections . All collections on loans already covered by guarantee payments shall be proportionately shared as follows: 1) Eighty-five per cent (85%) of collections made by banks under this subsection shall be remitted to PCIC, as Administrator of the Trust Fund, within 30 days after collection. 2) Fifteen per cent (15%) of all such collections, plus accrued interest, shall be retained by the bank. h. Accounting treatment 1) Loans covered by this subsection shall be segregated from other loan accounts of the bank concerned and shall be lodged under "Restructured Loans (LOI No. 1242)" account, which account shall be excluded from the computation of past due ratio and risk assets ratio. 2) Guarantee payments received from the PCIC shall be credited to a "Special Guarantee" account in the bank's books. Remittances to PCIC of collections on farmers' loans which are the subject of this subsection shall be charged against this "Special Guarantee" account. 3) Illustrative accounting entries shall be furnished the banks for their guidance. SECTION 1353. (Reserved) . SECTION 1354. Food Quedan Financial Program . In accordance with the pertinent provision of LOI Nos. 704, 1024 and 1139, dated June 9, 1978 May 22, 1980 and May 25, 1981, respectively, and Executive Order No. 849 dated November 26, 1982, the following guidelines shall govern the food quedan financing program. SUBSECTION 1351.1 Objectives of the program a. To augment the operating capital of food businessmen and area marketing cooperatives and encourage their active participation in the local procurement of the basic food commodities; b. To increase the direct involvement of private commercial banks in agricultural credit in compliance with PD 717, ( Effective April 18, 1984 ) c. To strengthen further the integrity and acceptability of the food quedan/chattel mortgage as collateral for loan availment; d. To enhance further the food supply and price stabilization program of the government; and e. To support the food production program of the government. SUBSECTION 1354.2 Legal bases a. Letter of Instruction No. 696 dated May 24, 1978, making funds available to the National Food Authority (NFA) and the Central Bank for free to qualified rural banks in the form of special time deposits; b. Letter of Instruction No. 704, dated June 9, 1978, establishing a Quedan Guarantee Fund and constituting the Quedan Guarantee Fund Board; c. Letter of Instruction No. 1024, dated May 22, 1980, authorizing the Quedan Guaranteed Fund Board created under Letter of Instruction No. 704 to include grains and other commodities in its Quedan Financing Program; d. Presidential Decree No. 4, dated September 26, 1972, as amended by Presidential Decree Nos. 699 and 1485, dated May 12, 1975 and June 11, 1978, respectively, creating the NFA and prescribing its functions, powers and authorities; e. Presidential Decree No. 1770, dated January 14, 1981, reconstituting the NGA into NFA and broadening its functions and powers; f. Letter of Instruction No. 1139, dated May 25, 1981, directing the Quedan Guarantee Fund Board to implement the inclusion of other food commodities under the purview of the Quedan Financing Program; and g. Executive Order No. 849, dated November 26, 1982, increasing the loan value and guarantee coverage under the Food Quedan Financing Program and other purposes. ( Effective April 18, 1984 ). SUBSECTION 1354.3 Terminology a. Food businessmen (FB) an NFA licensed/registered food businessman/NFA licensed/registered food businessman/NFA accredited farmer; Area Marketing Cooperative AMC/Basahang Mayon endorsed by the Bureau of Cooperatives Development (BCOD) and likewise licensed/registered with NFA; or producer/processor/manufacturer/trader of food commodities other than grains or grains substitutes. b. Lending bank (LB) any banking institution organized and existing under the laws of the Republic of the Philippines and duly authorized by the Central Bank of the Philippines and accredited by the Quedan Board to participate in the Food Quedan Financing Program. c. Food quedan (FQ) simply known otherwise as quedan, a negotiable warehouse receipt by the terms of which the food deposited in a bonded warehouse, duly licensed by the NFA/Bureau of Domestic Trade, shall be delivered to the depositor or upon his order, or to bearer or holder in due course for value of the said receipt upon demand. d. Food deposit (FD) a quantity of grains, grains substitutes and non-grain food commodities delivered to and accepted by a bonded warehouseman for the purpose of storage and for which a quedan is issued/chattel mortgage executed, or the quantity of said food commodities owned by a bonded warehouseman stored in his warehouse and for which a quedan is issued/chattel mortgage executed subject to NFA's requirements as to previous inspection and affidavit of ownership of the commodity in case of grain and/or grains substitutes. For purposes of these rules, grains and grains substitutes shall include palay, milled rice, corngrains, sorghum, soybeans, mongo and peanuts. Non-grain food commodities shall include, but shall not be limited to garlic, onions, potatoes, oranges, pomelo, cheese, curd, cheese pimiento, assorted meat, beef trimmings, boneless beef, broilers, cocoa butter, briskets, lamb legs, pork fats, veal hinds, processed fruits, dried squid, marine products, shark meat, smoked fish, ham, processed meat, fruit and orange concentrates. e. Special time deposit (STD) the amount deposited by CB with eligible rural banks pursuant to LOI No. 696 and its implementing memorandum to all rural banks. f. Quedan Guarantee Fund Board (QGFB) a group of officials, otherwise known as the Quedan Board, which is empowered to administer the fund and is composed of the NFA Administrator as Chairman, with the Central Bank Governor and the Minister of the budget or their duly authorized representatives as members. g. Fund the quedan guarantee fund established under No. LOI No. 704, as amended, to guaranteed the existence of food in storage covered by food quedan/chattel mortgage up to eighty per cent (80%) of the outstanding loan. h. National Food Authority (NFA) a body corporate organized and existing under and by virtue of PD No. 4, as amended, for the integrated growth and development of the food industry. ( Effective April 18, 1984 ). SUBSECTION 1394.4 Statement of policies . a. Purpose of loan To finance food businessman in the procurement of food commodities and Payment of other incidental expenses such as transporting, storage, processing and marketing. b. Eligibility requirements of food businessman (1) He must be a depositor of locally produced God commodities in a bonded warehouse, duly licensed by the NFA/Bureau of Domestic Trade; (2) He must be a holder in due course of a negotiable food quedan or the owner of food commodities covered under the program and subject to a chattel mortgage; (3) In the case of Area Marketing Cooperatives (AMC), it must be duly endorsed by the Bureau of Cooperatives Development (BCOD) of the Ministry of Agriculture and likewise licensed by NFA. c. Term and conditions (1) Collateral Deed of pledge on the negotiable food quedan issued by a duly licensed bonded warehouseman in accordance with NFA rules and regulations or chattel mortgage on food deposits. (2) Loan ceiling The loan ceiling shall be as prescribed under Section 23 of the General Banking Act. (3) Loan value The loan value shall be eighty per cent (80%) of the face value of the quedan/chattel mortgage compared with the prevailing government support price. (4) Types and term of loan Straight loan for 180 days or one year credit line made available for notes not exceeding 180 days. (5) Loan value, rediscount and lending rates The loan value, rediscount and lending rates stated in Sec. 1271 shall be observed. (6) Maturity Loans and advances against eligible food quedan papers shall have a maturity period of not exceeding one hundred eighty (180) days. ( Effective Nov . 29, 1985 ). (7) Quedan guarantee fund The fund shall guarantee the existence of food deposits covered by quedan/chattel mortgage up to an amount equivalent to eighty per cent (80%) of the outstanding loan in accordance with the rules on guarantee coverage of food deposits covered by quedan/chattel mortgage. The QGFB shall collect from the LB a guarantee fee of one per cent (1%) per annum based on the amount of loan which shall not be passed on to the FB. (8) Purchase guarantee If the existing food deposit cannot be sold at a price higher than the prevailing NFA's buying price or government support price, as the case may be, NFA shall purchased such portion of the existing food deposit equivalent to the outstanding loan covered by food quedan/chattel mortgage at the prevailing government support price and the same proceeds thereof shall be applied for payment of the outstanding loan. ( April 18, 1984 ) cdlex SUBSECTION 1354.5 Responsibilities of participating agencies a. Central Bank (CB) (1) To disseminate the terms and conditions of the program to eligible lending banks; (2) to administer the funds made available under LOI 696 and to grant STDs to eligible RBs; and (3) Within the bank's existing ceiling, to extend rediscounting facilities to all eligible papers under this food quedan financing program. b. Lending Bank (LB) (1) To disseminate the terms of loans as well as requirements to its branch offices; and (2) To evaluate, process and extend loans under this program. c. National Food Authority (NFA) (1) To accredit the prospective borrowers; (2) To periodically inspect the monitor bonded stocks per existing NFA inventory reporting system; (3) To supervise, control and monitor quedans issued by bonded warehouseman; (4) To conduct joint inspection of stocks with authorized representative of lending banks; (5) To ensure that stocks covered by the Food Quedan Financing Program are not allowed to be withdrawn unless the depositor has settled all his obligations with the LB; and (6) To purchase the food stocks equivalent to the outstanding loans covered by quedan at the option of lending bank upon maturity of the loans. d. Quedan Guarantee Fund Board (QGFB) (1) To administer the food quedan guarantee fund; (2) To executive a guarantee agreement with eligible LBs; (3) To pay legitimate claims by LBs against the Fund and (4) To oversee the implementation of LOI 704, as amended, and its implementing rules and regulations. e. RBs, PNB, Land Bank as Masagana Creditor (MC) (Optional) (1) To enter into collection agreement with FBs and LBs; (2) To issue an authority to collect to FBs specifying the arrangements for the FBs assistance in loan collection of M-99; (3) To provide the FBs and LBs through Provincial Program Officers (PPOs) a list of Masagana borrowers who have outstanding obligations with their respective banks; and (4) To receive the amount representing collections turned over by the duly authorized FB for the payment of Masagana 99 loans of farmer-borrowers, in accordance with authority to collect issued by the MC to the FB. f. Banker Association To circularize among member banks the implementing rules and regulations of this financing program and encourage them to participate in said program. g. Confederation of Filipino Rice and Corn Associations, Inc . (CONFED) (1) To recommend to participating banks eligible grains businessman; (2) To assist in the collection of the loans granted to its recommended members; and (3) To circularize among its members the mechanics of the program h. Bureau of Cooperatives Development (BCOD) (1) To certify and endorse eligible AMC; and (2) To assist the lending banks in collection of loans extended to AMCs. I. National Food and Agriculture Council (NFAC) Provincial Program Officers (PPOs) of Masagana 99 shall secure from MC the list of Masagana 99 borrowers to be given to grains businessman and lending banks. (Effective ( April 18, 1984 ) SUBSECTION 1354.6 Food commodities in storage at the bonded warehouse of the Food Terminal, Inc . The food quedan financing program for food commodities in storage at the bonded warehouse of the Food Terminal, Inc. shall be in accordance with the provisions of Appendix 39. ( Effective April 18, 1984 ). SUBSECTION 1354.7 Guidelines on the use of food trust receipts under the Food Quedan Financing Program The guidelines on the use of food trust receipts under the Food Quedan Financing Program shall be in accordance with the provisions of Appendix 40. ( Effective April 18, 1984 ). SECTION 1355. Cooperative Finance System . The Cooperative Finance System (CFS) is specially designed to effectively lend and invest the Integrated Cooperative Finance Program (ICFP) loan and trust fund with well-managed and credit deserving eligible cooperatives so that they could in turn efficiently serve the needs of their members. The following rules and regulations are hereby promulgated to govern the operations of the CFS, particularly, the Cooperative Finance Group when it lends and invest the ICFP funds to eligible cooperatives thru banks , primarily the Cooperative Rural Banks (CRBs). ( Effective Dec . 18, 1985 ). SUBSECTION 1355.1 Definition of terms . Unless otherwise specified, the following terms used in these rules and regulations shall mean: a. Cooperative An organization composed primarily of small producers and consumers who voluntarily join together to form business enterprises which they themselves own, control or patronize including samahang nayons, area marketing cooperatives and any federation of such cooperatives. A small producer shall mean a self employed individual who, by himself or with this family provides the primary labor requirements of his business enterprise or one who earns at least fifty percent (50%) of his gross income from the payment, proceeds or income of the labor he provides. b. Samahang Nayon (SN) A body corporate composed primarily of small farmers residing and/or farming within the geographical limits of a barangay for the purpose of conducting business activities by and/or for its farmer members and of improving the quality of life of the people in the barangay. c. Area Marketing Cooperative (AMC) A voluntary business association of Samahang Nayons and pre-cooperatives duly registered with the Bureau of Cooperatives Development (BCOD), engaged primarily in the marketing of the produce of its members as well as in the supply of their production inputs and other requirements. d. Cooperative Rural Bank (CRB) A rural bank organized by samahang nayons and duly established cooperatives, registered with BCOD and approved by the Central Bank under the Rural Banks Act (R.A. No. 729 as amended). e. Loan Fund That portion of USAID loan and Philippine Government Counterpart funds and other sources earmarked for lending to eligible cooperatives . f. Trust Fund That portion of Government of the Philippines (GOP) funds, USAID loan or funds from other sources earmarked for the purpose of expanding the equity base of eligible cooperatives. g. Guarantee Fund A fund established to cover possible losses arising from uncollected loans which cannot be covered by the liquidation of collaterals in accordance with pertinent provisions in these guidelines. h. Cooperative Finance Group (CFG) A special unit in the Central Bank created for the purpose of providing specialized handling, monitoring, supervision and servicing of loans to cooperatives made through CRBs/Banks. i. Debt-Equity Ratio Refers to the ratio of term liabilities to the networth of the borrowing cooperative. j. Special Time Deposit (STD) Funds made available to eligible participating CRB/Bank to finance the loan(s) applied for by eligible cooperative. k. Disposable Earnings Refers to the balance of net income plus non-cash expense items less mandatory cash deductions or appropriations for education, training, general reserve, kilusang bayan guarantee, etc . l. Risk Asset Ratio Refers to the ratio of a bank's networth to its risk assets. Risk asset is defined as total assets minus non-risk assets such as cash on hand; due from Central Bank; evidence of indebtedness of the Republic of the Philippines and the Central Banks; loans covered by holdout on an assignment of deposits; Bank premises furniture, fixture and equipments (depreciated); and others as approved by the Monetary Board. m. ICFP The Integrated Cooperative for Finance Program. n. USAID The United States Agency for International Development. o. NEDA The National Economic and Development Authority. p BCOD The Bureau of Cooperatives Development. q. NFA The National Food Authority. r. CFPI The Cooperative Foundation Philippines, Inc. s. CDLF The Cooperative Development Loan Funds. t. LBP The Land Bank of the Philippines. (Effective Dec . 18, 1985) . SUBSECTION 1355.2 General credit policies a. The extension of credit shall be consistent with sound lending and business principles so that the cooperatives may prosper and grow in size, scope and quality of service to their members. b. A loan to an eligible cooperative shall be based upon sound credit factors. It should be in an amount sufficient to accomplish the purpose for which it is intended and provide terms and conditions which reasonably assure repayment and protect the cooperative's credit base. c. Applicant cooperative must have capital contributions sufficient to meet the debt-equity ratio prescribed under these guidelines. d. Term loans that may be granted to an eligible cooperative shall be such that its total outstanding term liabilities would not exceed a debt-equity ratio of two is to one. e. The Cooperative Finance System shall pursue a policy of providing a total financing package for eligible cooperatives subject to a loan and capital package provided that: 1) The amortization of the term loan component must be repaid from disposable earnings of the cooperatives; 2) Seasonal and commodity loans shall be repaid as inventories of financed commodities and products are sold and proceeds collected, but in any event the loan shall be repaid within a period of 12 months or less; and 3) The retirement of the capital assistance (Trust Fund) component must be paid from a capital build-up agreed to by the cooperative members and made a part of the loan agreement . f. Each borrower shall be required to invest a 5% out of advances on term loans and 3.75% out of advances on seasonal loans (except re-advances made within the year) in a Guarantee Fund established to cover losses arising from uncollected loans which cannot be covered by the liquidation of collaterals. Each borrower is to make investments at the above rates until such time as the amount of investment in the Guarantee Fund equals 10% of the borrower's combined loan outstanding. The funds are to be invested in prime securities by the CFG and the interest income shall accrue to the benefit of each borrower. Any net loss suffered from uncollected loans granted under this program shall be chargeable up to eighty five percent (85%) against the guarantee fund and the balance of fifteen (15%) against the CRB/Lender. Losses shall first be charged against the investment of the delinquent borrower in the Guarantee Fund. Any remaining losses will be charged against the investment of other borrowers. ( Effective Dec . 18, 1985 ). SUBSECTION 1353.3 Types of financing . Loan and capital funds made available utilizing USAID Loan and Philippine Government Counterpart funds of the Cooperative Marketing Project (CMP) may be utilized for any or a combination of the following types of financing: cdlex a. Loans, Purposes : 1) Seasonal operating capital and commodity loans may be extended to provide short term operating funds and to finance increase in inventories and receivables that shall be liquidated within a period of twelve months or less. 2) Term loans may be granted for long term or permanent working capital, for facilities and other non-current assets payable on amortization basis within a period of more than one to ten years. b. Joint or Split Financing : A number of cooperatives which have loans outstanding from the other cooperative financing programs may need additional credit. Loans may be made to these cooperatives provided satisfactory arrangements can be made with the other lenders; for dividing collaterals, deferrals where necessary, appropriate repayment programs, etc. so that loans made under this authority can be granted on a sound basis. In some cases, cooperatives rent operating facilities owned by LBP. In the event that it is determined to be desirable, arrangements might be made whereby the borrower may acquire such facilities by issuing preferred stocks to the CMP for the purchase cost of said facilities or that LBP may be willing to sell the facilities, under a long term purchase contract to be paid out of a separate program for repaying regular loans, or on a long term loan purchase contract. Split financing will be involved and should be allowed on the condition that satisfactory arrangements can be worked out with LBP and/or CDLF. c. Trust Fund Investment : Investment in preferred stocks of cooperatives not to exceed 100% of their paid-up capital or P1,000,000 may be made to supplement equity capital owned by members in order to provide an adequate capital base to support the regular term and seasonal loans that may be granted. Preferred stocks shall be preferred as to assets but not as to interest and shall earn interest only when interest is declared for common stocks and shall earn at a rate to 1/5 of the rate declared for common stocks. The preferred shares representing Trust Fund Investment in the capital stock of a cooperative shall be retired within a period of ten (10) years in accordance with the capital build-up program of the eligible cooperative to be reckoned from the date of each release of capital assistance. ( Effective Dec . 18, 1985 ). SUBSECTION 1355.4 Authorized lenders . Any Rural Bank/Bank that meets all the following requirements may be allowed to participate under this program: a. Rural Bank (1) It must be operating substantially in accordance with laws, rules and regulations and directives of the Monetary Board; (2) Its ratio of past due loans to total loans outstanding does not exceed 25% at the time of application; (3) Its risk asset ratio should not fall below the 10% minimum requirement with the grant of the loan being applied for; (4) There must be no directive either from the Governor/Monetary Board prohibiting it from receiving financial assistance from the Central Bank. b. Other banking institutions not under the supervision of the SES Department III (1) Those certified by the appropriate Departments in the Central Bank supervising the same as operating substantially in accordance with laws, rules and regulations and directives of the Monetary Board; (2) The applicable requirements under 4.01 (b), and (d) ( Effective Dec . 18, 1985 ). SUBSECTION 1355.5 Eligible borrowers . Cooperatives eligible to avail themselves of loans and capital assistance from the CB-CFG through participating CRBs/Banks under this program are the following: a. Cooperatives (as defined in Section 1) which met/agree to meet all the following requirements: (1) Those registered or re-registered with the Bureau of Cooperatives Development in accordance with P.D. 175 and LOI 23. (2) The main business activities are: a) The supply of certified seeds, fertilizers, and other farms inputs to members; b) The buying, storing, transporting, processing, and marketing of the produce of their cooperative members; c) A combination of the supply of farm inputs and the marketing of the produce of members; and d) Providing other economic services or on behalf of members. (3) At least 50% of the total business of the cooperative must be with its members. (4) Keeps and maintains acceptable and adequate accounting records and provides financial and operating statements in approved form. (5) Share capital shall earn interest at rates prescribed by the Bureau of Cooperatives Development. (6) All declaration of cash interests on share capital and patronage refunds be made only after prior approval by the CFG. ( Effective Dec . 18, 1985 ). SUBSECTION 1355.6 Credit requirements . The Cooperative Finance Group may grant credit on the basis of careful analysis of, but not limited to, the following major credit factors: a. Management A cooperative seeking or obtaining credit should have responsible, competent and cooperative management and board of directors. b. Loan Purpose and Terms The purpose shall for a constructive use, as those defined in Subsections 1355.3.a 2357.3.a, and 3364.3.a of Books I, II and III, respectively, to further improve the cooperative's services to its members and patrons. The terms shall be in accordance with those prescribed under Subsections 1355.8.a, 2357.8a, and 3364.8.a of Books I, II and III, respectively. c. Repayment Ability (1) Term Loans The determination of repayment ability requires thorough analysis of the adequacy of historic and projected cash flows arising from operating margins, or retains out of payment for products, or from scheduled investments by members that will be available to meet loan repayments and build networth. (2) Seasonal Loans The determination of the repayment ability for seasonal loans requires an analysis of the cooperative's ability to properly utilize the loan and revolve its current assets. A seasonal loan should be related to the value of the current assets being financed or to the net working capital position margining or supporting the loan. d. Financial Condition and Operations Sound financial condition and operations require the ability of the borrowing cooperative to honor obligations, to continue as an effective business organization and to protect the lender from undue risk in case of adversity. Financial analysis include the evaluation of the assets and their composition, and quantity and quality of net working capital, currency of liabilities and make-up of the networth as evidenced by balance sheets and supporting schedules. Operational analysis includes the evaluation of the type and volume of business, operating efficiency and net earnings as represented by profit and loss statements together with related schedules. e. Economic Environment An analysis of the economic environment should be made of the need for the cooperative and its ability to provide goods or services to its members at competitive prices. The report should include an analysis of member support, either direct or through the SN, an analysis of competition, industry trend, any changes in the type of agricultural production, government policies and the legal climate in which the operations are conducted.; ( Effective Dec . 18, 1985 ). SUBSECTION 1355.7 Amount of loan . The amount or size of loan/financial assistance is determined according to the corporate needs of an applicant based on the feasibility study submitted which should be within the debt-equity ratio provided in these guidelines, but such loan shall be granted only to the extent of the amount needed which should be within the applicant's capacity to pay and the loan value of its collateral securities. ( Effective Dec . 18, 1985 ). SUBSECTION 1355.8 Loan periods, extension periods The periods shall be adopted to the kind of loan applied for: (1) Seasonal commodity loan shall have a term of not exceeding one year . (2) Seasonal operating loan shall have a term of not exceeding one year. (3) Term loan shall have a term of not exceeding ten years. (4) Special term loan shall have a term of not exceeding ten years. b. In cases of default by a borrower arising from fortuitous events or force majeure, or in other justifiable or meritorious cases, the CRB or other lender may, with prior approval of the CFG Loan Committee, allow restructuring of the loans. ( Effective Dec . 18, 1985 ). SUBSECTION 1355.9 Collateral security, loan value The type and amount of collateral required should be governed by the relative strengths and weaknesses of the cooperative's credit factors. Collateral should not be used as a sole basis for extending credit but it should nevertheless be sufficient to provide the lender reasonable protection from loss in the case of adversity. a. Whenever necessary and to assure reasonable safety, loans shall be granted with collateral security such as: (1) Seasonal commodity loans shall be secured by eligible commodities or products pledged under satisfactory warehouse receipts or other title document or lien and by assigned current accounts receivable when arising from sale of pledged commodities. (2) Seasonal operating capital loans shall be secured by chattel mortgage or other first lien on revolving receivables and inventories. (3) Term loans shall be secured by real estate and chattel mortgage on fixed assets such as land, building, machinery and equipment including rolling stocks. b. Loan Value; (1) Loans against real estate security shall not exceed seventy percent (70%) of the appraised value of the respective real estate security, plus seventy percent (70%) of the appraised value of insured improvements, and such loans shall not be made unless title to the real estate, free from all encumbrances, shall be in the name of the mortgagor. (2) Similarly, loans on the security of chattels shall not exceed fifty percent (50%) of the appraised value (cost if new) of the security, and such loans shall not be made unless title to the chattels, free from all encumbrances, shall be in the mortgagor. (3) Where the CRB/Lender has effective control of the agricultural products given as security, the amount of loans may be increased to the extend of seventy percent (70%) of their marketable value in the case of rice, corn and sugar, and sixty percent (60%) of the marketable value of other stored non-perishable crops. (4) Where the assigned accounts receivables arose from sale of pledged commodities to government agencies/instrumentalities and responsible private corporations/entities, the amount of loan shall not exceed seventy percent (70%) of such assigned receivables. ( Effective Dec . 18, 1985 ). Section 1355.9b (5) (Additional provision as provided by CBP Circular 1140 dated April 13, 1987) SUBSECTION 1355.10 Interest rates a. Interest at the rate of nine percent (9%) per annum for seasonal operating and commodity loans and eight percent (8%) per annum for term and special term loans shall be charged the borrowers. No interest shall be collected in advance and no service charge are allowed to be collected. b. Interest to be charged CRBs or other lenders on Special Time Deposits shall be at four percent (4%) per annum on seasonal operating and commodity loans and at five (5%) percent per annum on term and special term loans. c. Notwithstanding, provisions in a and b above, it should be the long term objective of CFS to provide the types of credit needed by eligible borrowers at the lowest reasonable cost on a sound business basis, taking into account money accosts, appropriate and necessary reserves and expenses, capital requirements, and services provided by CRB/Lender and CFG. Loans made through the CFS shall bear such rate or rates as may be determined by the Integrated Cooperative Finance Committee (ICFC) with the approval or confirmation of the Monetary Board based on proper supporting documentation. ( Effective Dec . 18, 1985 ). SUBSECTION 1355.11 Loan repayment schedule . Repayment shall be scheduled in approximately equal installments of principal and interest, monthly, quarterly or semi-annually, except in cases where payment plans have been granted so arranged as to fall due on the approximate periods of borrower's highest income or when the principal income of the borrower is available. ( Effective Dec . 18, 1985 ). SUBSECTION 1355.12 Lending procedures a. Application for Financial Assistance (1) Any eligible cooperative seeking financial assistance under this program must file with the nearest authorized CRB/Bank the following: a) Duly accomplished application form for loan and/or capital assistance; b) Project feasibility data on the object of financing; c) Certificate of incumbency, listing of officers, their signature and address and expiration of term; d) Board resolution authorizing certain officers to negotiate and contract for financial assistance or where Board does not have such authority, then a general assembly resolution authorizing certain officer to negotiate and contract for financial assistance; e) Latest financial statement and operation; audited financial statement and operations for the last three (3) years where practicable and available; f) Certified copy of by-laws and articles of incorporation together with all amendments thereto; and g) Accreditation by National Food Authority approving the cooperative as a procurement agent/buyer and handler of specific commodities such as rice, where applicable/appropriate. (2) Upon proper positive evaluation of the application for loan and/or capital assistance submitted by a borrowing cooperative, the CRB/Bank shall file a duly accomplished application for STD with the CB-CFG together with the following: a) Application for loan and/or capital assistance of the cooperative together with the other requirements and the board resolution authorizing certain officers to negotiate and apply for loan, to invest in the AMC's Guarantee Fund and to abide by the terms and conditions of the loan agreement developed. b) CRP board resolution approving and endorsing the cooperative's application and authorizing its officers to negotiate for STD Month CB-CFG. c) Copy of financial statement and supporting schedules as of date of application. d) Weekly report on required and available reserves against deposit liabilities for four consecutive weeks. e) Information sheet duly accomplished, in form approved by CFG. f) Terms and Conditions of Special Time Deposits. g) Certificate of time deposit in the name of CB-CFG signed in blank by authorized officer. b. Processing and Evaluation CB-CFG shall review and evaluate the application for loan and/or capital assistance. Field investigation shall be conducted to determine the actual purpose of loan and/or capital assistance, the eligibility of the applicant, the existence and condition of the securities offered and gather facts necessary to determine the viability and feasibility of the project. Recommendations made in the Business Analyst's report shall be the basis for the action of CFG Loan Committee on the loan application. c. Approval/Notice of Final Action (1) The CFG Loan Committee shall take appropriate action on all application for loans and/or capital assistance together with the CRB's/Bank application for STD and shall prescribe the terms and conditions of the covering loan agreements. Pursuant to Monetary Board Resolution No. 657, dated April 21, 1978, all loans exceeding 15% of the networth of the sponsoring lender, shall be subject to the approval of the Head, SES Department III, and the confirmation by the Monetary Board. (2) Upon confirmation by the Monetary Board, the CFG shall inform the applicant cooperative so that they could complete the required documentation. d. Release of Loan Proceeds The CFG shall release the proceeds of STD to the CRB/Bank and/or subscribe to the preferred shares of the applicant cooperative thru the CRB. The CRB/Bank shall then deposit the proceeds of STD in a separate bank account and release the same to a special savings account in the name of borrowing cooperative upon the completion of the loan documents such as promissory notes, loan agreements, etc. Withdrawal from the special savings account shall be subject to actual need and approval by the CRB/Bank Manager. ( Effective Dec . 18, 1985 ). SUBSECTION 1355.13 Use of borrowed funds, diversion . The proceeds of a loan shall be used only for the purpose for which it was granted; if used for other purposes, the contract of loan shall be deemed cancelled and the lending institution shall immediately demand repayment of the amounts released, without prejudice to the criminal prosecution of the borrower under the law. ( Effective Dec . 18, 1985 ). SUBSECTION 1355.14 Application of payment, remittance to CB-CFG a. Any payment made by a borrower to CRB/Bank shall first be applied to the interest due and payable; the balance, to the principal of the loan. b. Collection from the borrowing cooperative shall be remitted to CB-CFG within five (5) days from date of receipt, otherwise, the CRB/Bank shall pay an amount equivalent to three percent (3%) per month on the amount due as liquidated damages in addition to the interest rates prescribed under Section 10. ( Effective Dec . 18, 1985 ). SUBSECTION 1355.15 Default, foreclosure . In cases where diligent collection procedures fail and where forebearance is not deemed advisable, the lender and CFG shall take immediate action deemed appropriate under the circumstances. The right to foreclosure real/chattel mortgages, pledged commodities and assigned assets arises from the time the borrower defaults in the payment of the loan/amortizations or violates any condition of the loan/agreement. (Effective Dec. 18, 1985). LexLib SECTION 1356. Rules and regulations to govern the lending program under the Aromatic Tobacco Trading Loan Fund thru authorized commercial banks . The following rules and regulations shall govern the lending program and availment of Special Time Deposits (STDs) by Authorized Commercial Banks from the Central Bank. SUBSECTION 1356.1 Authorized Commercial Banks . Commercial Banks that meet all the following requirements shall be allowed to participate in the lending program under the Aromatic Tobacco Trading Loan Fund (ATTLF): a. Those certified by the CB-SES, Department 1 as having no serious exceptions or deficiencies in their operations. b. Those eligible to rediscount with CB-DLC under existing rules and regulations. SUBSECTION 1356.2 Eligible Borrowers a. Borrowers eligible to avail of trading loans from participating commercial banks under the lending program of the ATTLF shall be the following: 1) Trading centers authorized by PVTA to purchase from Aromatic tobacco farmers and whose previous/current year's tobacco purchase are certified by PVTA. 2) Exporters/cigarette manufacturers of Aromatic tobacco who have commitments with the PVTA to purchase specified quantities of flue-cured Virginia or Burley and Turkish tobacco from authorized trading center whose previous/current year's tobacco purchases are certified by PVTA. b. The borrowers under Items a.1 and a.2 above must offer collaterals acceptable to the banks. In the event that the collaterals offered consist of stored redried Virginia tobacco in hogsheads of Burley and Turkish tobacco, the corresponding servicing/receipts/quedans evidencing the same should be covered by a deed of assignment which undertaking to notify the bank whenever the stocks are moved. SUBSECTION 1356.3 Eligible Loans a. The trading loans that may be financed through Special Time Deposits (STDs) from the ATTLF may be granted for a term not exceeding 180 days to be utilized exclusively for the purchase of flue-cured/air-cured Virginia or Burley and Turkish tobacco from farmers/trading centers. b. The aggregate amount of the loans to be granted or the outstanding balance on such loans at any one time, shall be, as follows: 1. Not more than the loan value of the collateral offered or P500,000.00 whichever is lower for trading centers. 2. Not more than 100% of the total value of tobacco already procured or P5 million whichever is lower, for exporters/cigarette manufacturers. Provided, however, that such loans or the outstanding balance thereon at any one time, in excess of P5 million may be allowed subject to prior approval of the Virginia Tobacco Technical Committee (VTTC) and the submission of the required collaterals. SUBSECTION 1356.4 Special Time Deposits a. At any time from March 1 to July 31 of each year, a participating commercial bank may submit to the CB-DLC its application for a Special Time Deposit (STD) supported by the following documents: 1) A list of eligible applicant-borrowers and the corresponding amounts of loans applied for. 2) A certification from the PVTA showing previous and current years' purchase of borrowers. b. If the application and its supporting documents submitted under 1356.4a are Manual of Regulations for Banks and Other Financial Intermediaries found in order, the STD to be approved shall not exceed 80% of the loans to be granted by the participating bank to its borrowers, subject to the limitations under 1256.3b. c. The STD shall be released not earlier than April 1 of each year upon submission by the participating bank of a duly signed certificate of time deposit and shall be payable on demand but not beyond September 29 of the year said STD was released. STDs shall bear interest equal to the MRR (90) applicable to the week immediately preceding the grant of said STD less 6% per annum. The STD shall be converted into trading loans within a period of thirty (30) days. (Effective Oct . 12, 1984) . d. On the 31st day from the issue-date of the STD, the participating bank shall furnish CB-DLC a report on the trading loans generated from the STD proceeds and any portion that has not been converted into loans shall be immediately remitted to the CB-DLC, otherwise the demand deposit account of the participating bank shall be automatically debited for such portion including accrued interest plus the corresponding penalty. e. CB-DLC shall furnish PVTA a copy of each of the letter advising the participating bank of the approval of its application for STD and the corresponding credit advice. f. The STD shall be liquidated with the equivalent amount of repayment(s) on the corresponding loans generated from the STD proceeds, which amount shall be immediately remitted to CB-DLC. In no case, however, shall full liquidation of such STD be made beyond-sixty days after July 31 of each year, after which any unpaid balance thereof shall be automatically debited against the demand deposit (D/D) account of the participating bank concerned with the Central Bank. If the balance of its D/D account is insufficient to cover the aforementioned debit, the bank shall remit immediately to the Central Bank the amount equivalent to the difference thereon, together with the accrued interest. SUBSECTION 1356.5 Lending Procedures of Participating Banks a. She funding of loans under this program shall be 80% from the STD proceeds and 20% from the participating bank's own fund. b. The participating bank shall release the loan proceeds as follows: 1) Trading Centers Directly to the borrower in lumpsum. 2) Exporter/Cigarette Manufacturers In staggered amounts or as requested based on the value of aromatic tobacco purchased during the current year as certified by the PVTA. c. Loans granted under this program shall bear interest equal to the MRR (90) applicable to the week immediately proceeding the grant of the corresponding STD. (Effective October 12, 1984) . SUBSECTION 1356.6 (Deleted by Circular No. 987) SUBSECTION 1356.7 Liquidated Damages a. Liquidated damages of 5% per annum, over and above the existing STD rate shall be imposed on past due STDs for the period that said obligations are overdue. b. Likewise, a penalty rate equal to the MRR (90) applicable to the week during which the default occurred shall be imposed over and above the existing STD rate on the unremitted portion of STDs that are not converted into trading loans and liquidated within the allowable 30-day period without valid justification. (Effective Oct. 12, 1984) SUBSECTION 1356.8 Exemption from reserve requirements of STDs under the ATTLF . Special time deposits in connection with the abovementioned lending program are exempted from the reserve requirements provided under Sec. 1255. SUBSECTION 1356.9 Virginia and Burley Tobacco financing . Qualified commercial banks may also participate under the Virginia and Burley Tobacco financing Programs, now implemented thru rural banks and stock savings and loan associations. SECTION 1357. Cottage Industry Guarantee and Loan Fund (CIGLF) . The following rules and regulations will govern this Guarantee and Credit Program to be carried out through the lending facilities of the Philippine National Bank (PNB), the Development Bank of the Philippines (DBP), the rural banks, stock savings and loan associations, and private development banks under the supervision of the Central Bank of the Philippines (CBP) for the financing of fixed assets and working capital of cottage industries duly registered/revalidated by the National Cottage Industry Development Authority (NACIDA). SUBSECTION 1357.1 Definition of terms . Unless otherwise specified, the following terms shall have the following meaning whenever used in these Rules and Regulations: a. Borrowers NACIDA-registered/revalidated members availing of the loan. b. Cottage Industry The term "Cottage Industry" shall mean a modest economic activity for profit using primarily indigenous raw materials in the production of various articles that generally highlight craftsmanship, artistic skills and tradition of a country; Provided , however , That all cottage industries shall be owned and operated by Filipino citizens, or by corporations, partnerships or co-operatives at least seventy-five per cent (75%) of the capital investment of which shall be owned by Filipino citizens and whose members of the Board of Directors shall be Filipino citizens: Provided , further , That the total assets of which shall not exceed One Hundred Thousand Pesos (P100,000.00) at the time of registration with the NACIDA. The NACIDA Board, however, shall be empowered to redefine cottage industries as needed with presidential approval. c. Financing Institutions DBP, PNB, rural banks, private development banks and stock savings and loan associations qualified to participate in this credit program. d. Fund The Cottage Industry Guarantee and Loan Fund. e. Guarantee Undertaking of the Fund to pay eighty-five percent (85%) of the unsecured portion of the loan covered by the guarantee. f. Guarantor The Philippine Government, as represented by the Central Bank of the Philippines as Administrator of the Fund. g. Loan The loan extended by a financing institution to a borrower under the Cottage Industry loan program under Executive Order 622. h. Losses Amount of the loan covered by the guarantee which, upon exhaustion of all means of collection by the financing institution concerned, remains uncollected. i. NACIDA . The National Cottage Industry Development Authority. j. STD Special Time Deposit made by CB with rural banks, private development banks and stock savings and loan associations as seed fund for extending loans to cottage industries. SUBSECTION 1357.2 Participating financing institutions . Initially the DBP and the PNB shall be eligible to participate in the financing of cottage industries. Subsequently, such rural banks, private development banks and stock savings and loan associations as may be determined by the Central Bank, through its Department of Rural Banks and Savings and Loan Associations, as qualified to participate in this program shall be eligible to participate therein. SUBSECTION 1357.3 Loans extended by participating financing institutions to borrowers a. Purpose of loan . Fixed assets and working capital loans will be made available to viable cottage industries where the potential market and existing markets, domestic and foreign, are already established for any of the following industries: 1) Fibercraft , such as but not exclusive to, making of abaca ropes and twines, buntal fiber extracting and buri leaf braiding; 2) Woodcraft , such as, but not exclusive to, making of wooden shoes, wooden fans, walking sticks (canes) and woodcarving; 3) Hat Weaving , such as, but not exclusive to, calacio, buri, rafia, korogomoy, buntal and bamboo hats, salakot and helmet; 4) Mat Weaving , such as, but not exclusive to, doormats, sleeping mats made of burg pandans, balilan, sakutan, and other similar materials; 5) Metalcraft , such as, but not exclusive to, making of jewelry, knives, bolos, scissors, razors, silverwares and brassworks. 6) Ceramics , such as, but not exclusive to, making of potteries, hollowblocks, tiles, fire-bricks, clay stoves and other ceramic products; 7) Shellcraft , such as, but not exclusive to, making of seashell buttons and coconut shell products; 8) Bamboo and Rattancraft , such as, but not exclusive to, maintaining of hammocks, basketry, making of sawali and other bamboo and rattan furniture and articles; 9) Small Agricultural Hand Tools , such as, but not exclusive to, making of plow points; 10) Toycraft , such as but not exclusive to, making of dolls and toys; 11) Embroidery ; 12) Needlecraft (including knitting and crocheting); 13) Loom Weaving , such as, but not exclusive to, making of fishnets, making of mosquito nets, weaving of Ilocano cloth, Igorot weaving, pia (Barong Pilipino), jusi and sinamay; 14) Machine Parts Manufacture ; 15) Home cigar-making ; 16) Food Preservation and Canning , including the making of vinegar, wine, lambanog, pili or peanuts confectionery or coconut candy (bucayo); 17) Other related crafts , such as but not exclusive to, making of brooms, pandan, nito 18) Leather products ; 19) Rubber products ; 20) Manufacturing industries done in the home with the aid of electrical gadgets and/or manual dexterity. b. Eligibility of borrowers . The applicant must be duly registered and/or revalidated with the NACIDA and provided that he has no past-due obligations with any government or private financing institutions or with any NACIDA loan program. c. Security . Loans may be secured by real estate mortgage and/or chattel mortgage (on movable properties) like machinery and equipment and other movable properties acceptable to the participating banks. Loans may be secured by sales contract, irrevocable letters of credit (domestic/foreign), confirmed purchase orders and/or signatures of co-makers) subject to existing policies and rules and regulations of the participating financial institutions. d. Loan limit . The maximum loan that may be granted to a borrower shall be governed by the provisions of Section 23 of the General Banking Act, as amended, but in no case shall such exceed one hundred thousand pesos (P100,000.00). e. Term of loans . Term of loans shall be as follows: Working Capital Loans maximum of three (3) years Fixed Asset Loans maximum of ten (10) years f. Interest rate . The loan shall bear an interest rate in accordance with existing Central Bank policy on maximum lending rates. g. Penalty for non-payment . A penalty rate not exceeding five percent (5%) per annum shall accrue over and above the interest rate specified in Item f hereof on any past-due amount. h. Loan application and processing 1) Loan applications shall be in the prescribed form and supported by the documentary requirements of the lending institutions concerned. 2) The financing institutions shall process, approve/disapprove the loan applications in twenty-one (21) days from submission of complete loan application. i) Loans in litigation In case of a suit for collection of the unpaid balance of a loan, there shall be collected from the borrower, in addition to the interest and penalty on the loan, an attorney's fee equivalent to ten percent (10%) of the unpaid balance, and cost of suit. SUBSECTION 1357.4 Cottage Industry Guarantee operations a. Loan eligible for guarantee coverage . All loans to qualified borrowers shall be eligible for guarantee coverage, except: 1) Loans which are fully secured by real estate and/or chattel mortgage. 2) Secured portions of partially secured loans. cdpr b. Extent of liability of the Fund . The guarantee undertaking of the Fund shall extend to an amount up to eighty-five percent (85%) of the loss of the guaranteed portion of the loan, with the remaining fifteen percent (15%) of such loss to be borne by the financing institution. c. Requirements for guarantee coverage 1) DBP and PNB shall enter into a guarantee agreement with MI-NACIDA, owner of the Fund, preparatory to the extension of loan accommodations to cottage industries qualified herein. An application for guarantee of loan already approved shall be submitted to CB-DRBSLA, copy furnished MI-NACIDA every 15th and end of the month by way of a list of borrowers indicating addresses, branch location, loan amounts, unsecured portion of the loan for guarantee, date approved, purpose of the loan, and loan terms. 2) A private banking institution desiring to avail itself of the guarantee coverage shall submit to the Central Bank for consideration an application in the prescribed form together with the following: a) List of borrowers in the prescribed form which must be submitted to the CB-DRBSLA within fifteen (15) days from the date of the release of such loans by the private banking institution; b) Guarantee Agreement for those borrowers duly signed by the authorized officer of the private banking institution; c) List of borrowers which may be submitted directly to the CB-DRBSLA either by personal delivery or by mail. The date of submission of the list shall be determined by the date of acknowledgment by any authorized representative of the CB-DRBSLA, if the list is submitted by personal delivery or by the date of mailing postmarked on the envelope or the registry receipt, if the list is sent by mail. d. Guarantee agreement . Upon approval of the applications for guarantee, and the countersignature of the Guarantee Agreement by the CB-DRBSLA, the financing institution shall pay the corresponding guarantee fee within ten (10) days thereof e. Guarantee fee . The guarantee fee shall be two percent (2%) per annum of the amount representing the guaranteed portion of the loans. Failure to pay the guarantee fee within the period specified under Item d of this sub-section shall constitute a ground for cancellation of the guarantee coverage and/or non-payment of any claim against the guarantee. Guarantee fees paid in accordance with these rules and regulations are not refundable. This guarantee fee shall passed on to the borrower. f. Commitments of the financial institutions by reason of guarantee . Upon approval by the CB-DRBSLA of the application for guarantee, the financing institution shall commit itself to: 1) Continue to exert the same diligent efforts in collecting the loan and exhaust all avenues open to it as it might have exercised and availed of, if no guarantee has been furnished by the Fund; 2) Adopt, after consultation with the CB-DRBSLA such measures as may be recommended by CB-DRBSLA to facilitate collection of the guaranteed portion of the loan; 3) Apply prior payments to the unsecured portion of the loan; 4) Keep the CB-DRBSLA posted on the status of past-due loans and the portion under guarantee thereof every end of the quarter. g. Filing of claims for guarantee payment 1) Claims for guarantee shall apply to losses pertaining to the unsecured portion of the outstanding loan principal; 2) Such claims shall be filed using the prescribed form with CB-DRBSLA. h. Payment of claims . The Fund shall pay the claim to the extent allowed under Item b of this subsection except in the following cases: 1) Where a claim for guarantee payment is disapproved due to causes enumerated in Item j of this subsection. 2) Where the proceeds of the foreclosed and sold mortgaged property are sufficient to liquidate the loan. In the case of private banking institutions before effecting such payment, the banking institution shall execute in favor of the CB-DRBSLA a Deed authorizing the subrogation of the CB-DRBSLA to the right of the private banking institution to collect from the borrower the unpaid portion of the loan: Provided , That such collections may be undertaken by the CB-DRBSLA through the private banking institution: and Provided, further , That the proceeds of claims in connection with rediscounted loans shall be remitted to the CB-DLC. Any amount recovered or collected from the borrower subsequent to the guarantee payments shall be applied in payment of the unpaid portion of the loan on the basis of 85% to the Fund and 15% to the private banking institution. In case the private banking institution undertakes the collection, the collected amount due the Fund shall, without necessity of demand, be remitted to the CB-DRBSLA within seven (7) days from date of collection, otherwise the private banking institution shall pay an amount equivalent to 1% per month on the amount due as liquidated damages as well as interest thereon at the rate of 1% per month from the date of collection up to the date of remittance. In addition, such violation shall constitute a ground for disapproval of future applications for guarantee coverage. i. Reports on recoveries/collections . Within 30 days after every calendar quarter, each private banking institution shall submit to the CB-DRBSLA a status report showing, among others, the names and addresses of borrowers, original amounts of loans granted, outstanding balances of the loans, amount and dates of payment of claims by the Fund, and collection thereon. No unpaid loans which are the subject of guarantee payment by the Fund shall be written off without the prior approval of the CB. j. Grounds for non-extension, cancellation or extinguishment of guarantee coverage . The following shall constitute grounds for non-extension, cancellation or extinguishment of guarantee coverage and/or non-payment of guarantee claims: 1) Where the financing institution has allowed the borrower to deviate from the approved projects and/or divert the proceeds of his loan to purposes other than those for which it was granted; 2) Where there was collusion between the borrower and the financing institution in the extension of credit to the prejudice of the Fund. Collusion exists when the borrower and the official(s) and/or employee(s) of the financing institution enter into an agreement for fraudulent purposes or whenever said parties conspire to defraud the Fund; 3) Where the financing institution made any material false statement, misrepresentation, omission, or concealment in the application, reports submitted to and/or in the claim filed with the CB-DRBSLA: and 4) Where the financing institution violated any of the provisions of these Rules and Regulations: Provided , That the enumeration of the above shall not preclude the CB-DRBSLA from cancelling or extinguishing its guarantee coverage for other causes or reasons evidencing fraud, bad faith or other machinations. SUBSECTION 1357.5 Special Time Deposit (STD) a. Special Time Deposit application . The Central Bank shall extend special time deposits with interest rate of 3% per annum to private banking institutions to finance 100% of the loans to be extended by them to applicants in accordance with these Rules and Regulations. At any time, a private banking institution may submit to CB-DRBSLA its application for special time deposit supported by the following documents: prcd 1) The list of borrowers with the corresponding projects to be financed and the amount of approved loans; 2) Corresponding certificates of registration/revalidation with NACIDA; 3) Duly signed Certificate of Special Time Deposit issued by the private banking institution which will be filled up with the amount of the STD that will be approved by CB-DRBSLA; 4) Latest Statement of Financial Condition and Statement of Income and Expenses; 5) Reports of required and available reserves against deposit liabilities for the past four weeks immediately preceding the date of application. b. Terms of STD . The STD shall be issued for a term of 60 days. Within 30 days from the receipt of STD, the participating private financing institution must either release the same to the end-user or refund the unreleased portion to the CB-DRBSLA if not released after 30 days from receipt. Failure on the part of the private financing institution to refund the unreleased portion of the STD shall subject the said private financing institution to a penalty of 14% per annum over and above the 3% p.a. interest on the STD. SUBSECTION 1357.6 Rediscounting a. Rediscounting application 1) Loans granted under this program shall be rediscounted with the CB-DLC. 2) The application for rediscounting shall be supported by the following: a) Duly accomplished rediscount schedule; b) Borrowers' promissory notes duly endorsed by the financing institution together with the corresponding certificate of registration and/or revalidation as of January 1, 1981 with the NACIDA and any or all collateral documents securing said loans; c) The private banking institution advice to CB-DLC to remit rediscounting proceeds to the CB-DRBSLA to be applied in payment of the outstanding STD of the applicant financing institution; d) The private financing institution's signed promissory note in favor of the Central Bank; e) Resolution of the Board of Directors authorizing the private financing institution to negotiate for the loan with the Central Bank and designating the officers authorized to endorse the promissory notes and sign all papers pertaining to the loan; f) Latest Statement of Financial Condition and Statement of Income and Expenses; g) Latest report on required and available reserves together with a certification that the financing institution has not incurred net reserve deficiencies for four consecutive weeks immediately preceding the date of its application; and h) Report on average monthly savings and time deposits during the past four months immediately preceding the date of its application. b. Rate and term of rediscounting . The CB-DLC shall rediscount eligible loans granted under this Program in accordance with CB rediscounting policy on supervised credit. c. Repayment of rediscounting obligations . Repayment of rediscounting obligations must be in accordance with the existing rules and regulations of the Central Bank. SUBSECTION 1357.7 Penalties . The penalties provided for in this section shall be without prejudice to the imposition of other administrative sanctions as well as the filing of civil or criminal cases as may be warranted by the evidence. SECTION 1358. Cotton Supervised Credit Financing Program 1982-83 . The Cotton Supervised Credit Financing Program for the Crop Year 1982-83 is to be administered by the CB-Department of Rural Banks and Savings and Loan Associations (CB-DRBSLA) through rural banks, stock savings and loan associations, the Philippine National Bank, the Development Bank of the Philippines, the Land Bank of the Philippines and private commercial banks under the Supervised Credit Program. The revised implementing guidelines are embodied in Appendix 20. SECTION 1359. Copper Stabilization Fund Program . The following guidelines shall govern availments under the Copper Stabilization Fund (CSF) established under Presidential Executive Order No. 759 dated January 7, 1982. SUBSECTION 1359.1 Purpose . Financial assistance under this special financing program will be granted for the purpose of financing operating cash flow deficits of primary copper producers occasioned by depressed metal prices. SUBSECTION 1359.2 Filing of applications . All applications for financial assistance under the Fund shall be filed with the Development Bank of the Philippines (DBP) which shall undertake the necessary evaluation and review of such applications. SUBSECTION 1359.3 Eligible borrowers . Borrowers eligible to avail of financing under the CSF are the mining companies primarily engaged in copper production which incur cash flow deficits due to a short fall between the cash cost applicable to a particular copper export shipment and the proceeds from said shipment. SUBSECTION 1359.4 Borrowing limit . The amount that may be borrowed from the Fund shall be equivalent to the difference between the cash cost applicable to, and the proceeds from, each copper shipment, based on the estimated copper content of such shipment. SUBSECTION 1359.5 Release from the Fund a. Loan releases from the Fund shall be in the form of Special Time Deposit (STD). For this purpose, the DBP shall submit to the Department of Loans and Credit, Central Bank of the Philippines, its application for a special time deposit supported by a list of eligible borrowers and the corresponding amounts of loans applied for. b. The STD shall be issued for a term not exceeding three (3) years, subject to restructuring should the excess of the proceeds from copper export shipments over the cash cost applicable to the same during the term of the STD would not be sufficient to cover full payment of the loan. c. The STD shall bear interest at the rate of seven percent (7%) per annum and shall be exempt from the reserve requirements on deposit liabilities, as an exception to Sec. 1255. SUBSECTION 1359.6 Repayments to the Fund . Re-payments of borrowings shall be effected whenever the price of copper export shipments exceed the cash cost in any particular copper shipment based on the estimated copper content thereof. Amounts repaid shall first be applied to accrued interest charges before any reduction of the principal amount borrowed. SUBSECTION 1359.7 Other requirements . Copper producers desiring to borrow from the Fund shall submit the following requirements: a. An undertaking to: (1) repay their obligations to the Fund as provided herein before servicing their obligations to any of their other creditors, both as to principal and interest (except interest on short term borrowings for working capital requirements); and (2) refrain from declaring dividends or otherwise distributing any profits for as long as their respective borrowings from the Fund remain outstanding; b. A commitment to contribute to the Fund, after their respective borrowings shall have been paid, an amount equivalent to ten percent (10%) of the excess of the proceeds from a particular copper export shipment over the cash cost applicable to the same, based on the estimated copper content of such shipment, subject to the provisions of Rule V of Presidential Executive Order 759. llcd c. A written contract, duly confirmed by its Board of Directors, agreeing to comply with the Rules and Regulations embodied in Presidential Executive Order No. 759 and to the terms and conditions of the borrowings as provided in this and such other guidelines as may be issued by DBP. SUBSECTION 1359.8 DBP guidelines . The DBP shall issue rules, regulations and guidelines for the implementation of Presidential Executive Order 759 dated January 7, 1982 and this section. SECTION 1360. Kilusang Kabuhayan at Kaunlaran (KKK) Trust Fund . The guidelines enumerated in Sec. 1280 shall govern loan releases to borrowers under the Kilusang Kabuhayan at Kaunlaran (KKK) livelihood program. SECTION 1361. Implementing Guidelines Governing the Participation of Banks Under the Expanded Yellow Corn Production Assistance Program (EYCPAP) . a. The End users/Suppliers Assistance Scheme Under this scheme an Agency Agreement shall be executed between the Central Bank (CB) as Administrator of the Yellow Corn Fund (YCF) and the lending institution as agent bank. The CB shall release to the agent bank amounts from the YCF which the agent bank, shall extend to the Ministry of Agriculture and Food (MAF) authorized institutional endusers/suppliers under the conditions herein indicated. For purposes of this guideline, the term "institutional end user" shall refer to enterprises which purchase yellow corn from farmers for the purpose of further physical processing or for packaging, such as for feed or for cornstarch production; however, traders and consumers shall not by themselves be considered institutional endusers, under this definition. The term "input supplier" shall refer to enterprises which sell inputs for the production of yellow corn to farmers, such as fertilizer, hybrid seeds, pesticides and other chemicals. 1) The amounts to be released by the agent bank shall be equal to the amounts released by the endusers/supplier to the farmer cooperators for the latter's cost of production inputs and crop insurance premium, determined as valid for financing by the MAF/CB, as supported by the certificates of insurance cover, promissory notes, marketing contracts and delivery receipts on inputs duly signed by the farmer-cooperators and which amounts shall not exceed the EYCPAP loan budget of P4,200 per hectare. 2) An interest rate of 6% p.a., inclusive of commissions and service fees, shall be charged by the agent bank on amounts released to the endusers/supplier. The interest rate of 6% p.a. shall be collected upon payment. The agent bank shall, upon collection of the loan, deduct for its own account a service fee of 1/2% p.a. on the principal amount released and a commission of 1% p.a. on the total amount collected. The balance of the amount collected after deducting the aforementioned service fee and commission shall be remitted to CB by the agent bank. 3) The end-user/supplier must repay the principal and the prescribed interest thereon to the agent bank within the 160 days from the date that the agent bank credits the account of the end-user/supplier. The agent bank shall, within one (1) banking day from receipt of payment from the end-user/supplier, remit to CB such payment as specified in Item 2 above. 4) The agent bank shall release the amount to the end-user/supplier within one (1) banking day after the former receives the credit advice from CB. The agent bank must release to end-user/supplier 100% of the amount released by the CB for the particular transaction. Any unreleased portion thereof shall be returned to the CB within two (2) banking days after receipt of the credit advice. If the agent bank fails to return to CB the unreleased portion within the prescribed period, it shall pay a penalty fee of 36% p.a. on the unreleased portion in addition to the 6% p.a. interest until such unreleased portion is remitted in full to the CB. 5) Any misappropriation of funds not released to end user/supplier and/or payments received from end user/supplier shall subject the agent bank and its officers responsible therefor to administrative and penal sanctions under the law. 6) The agent bank shall not be held liable in case of non-payment/short-payment/late payment by the end user/supplier of the amount released by the former to the latter. 7) In the event of non-payment/short-payment/late payment by the end user/supplier, the agent bank shall institute collection measures/legal actions against the end user/supplier. All expenses covering such measures/actions shall be for the account of the YCF. 8) The agent bank shall keep separate books of accounts to record transactions under this scheme which shall be subject to inspection and examination by the CB SES Department III. The agent bank shall report all transactions under this scheme to the CB on a monthly basis or as otherwise required by the CB. 9) All amounts released under the YCF to the agent bank shall be exempt from all reserve requirements and the Single Borrower's Loan Limit. 10) Only agent banks that shall be cleared by the CB-SES Department concerned shall be eligible to participate under this scheme. b. The Banking System Assistance Scheme CB will administer the Yellow Corn Fund (YCF) and shall release Special Time Deposits (STDs) to MAF/CB authorized banks for re-lending directly to qualified farmers. 1) Only banks authorized by the MAF which meet the CB eligibility requirements may avail of STDs by filing an application with the CB SES Department III covering the credit needs of farmers, excluding seed production, equivalent to the cost of production inputs and farmer's share of the crop insurance premium. Such amounts shall not exceed the EYCPAP loan budget of P4,200 per hectare. 2) STD funding will be 100% of loans to farmers which shall not be eligible for rediscounting with the CB. 3) CB SES Department III shall process STD applications and shall release such STDs to the participant banks through credit advice. 4) The participant bank shall release loans to qualified farmers duly certified/endorsed by the MAF technicians. The loans shall bear interest of 15% p.a. for a term of 150 days. Loan releases shall be in accordance with the approved farm plan and budget. 5) The CB shall charge the participant bank an interest rate of 3% per annum on the STD which shall be repaid within 160 days from date of receipt of credit advice. The depository banks through which the credit advice is released shall remit within 24 hours the proceeds of the STD to the participant bank. 6) Loans granted shall be fully covered by insurance in accordance with the existing rules of Philippine Crop Insurance Corporation (PCIC). 7) Cut-off dates for lending/planting, as approved by NFAC, shall be strictly adhered to in accordance with existing guidelines. 8) The participant bank shall release the STDs within 30 days from receipt thereof, and any unused portion shall be immediately returned to the CB SES Department III within two (2) days after the 30-day period. Any participant bank which fails to return the unused amount within this period shall pay a penalty at the rate of 39% per annum, in addition to the 3% p.a. interest until such amount is remitted in full to the CB. Similarly, any unauthorized use of the STD or non-payment thereof within two (2) days after the 160 day term of STD shall subject the participant bank to a penalty of 39% per annum in addition to the 3% p.a. interest until the full amount is remitted to CB, except those amounts which may be covered by indemnity payments by PCIC. casia 9) Any misappropriation of any STD received by the participant bank from the CB and/or payments made by the farmers to the bank shall subject the bank and its officers responsible therefor to administrative and penal sanctions under the law. 10) The participant bank shall be held liable for nonpayment/short-payment/late payment by the farmers of the amount released by the former to the latter. 11) In the event of non-payment/short-payment/late payment of the farmer, the participant bank shall institute collection measures/legal action against the farmer. 12) Rural Banks participating under this scheme should meet the following eligibility requirements: (a) There are no irregularities/serious exceptions in its operations; (b) Its risk asset ratio should not be less than 10% after taking into account the loans that will be granted under the EYCPAP; and (c) Its ratio of past due loans to total loan portfolio, excluding past due CB:IBRD loans which are covered by approved plans of payment that are duly complied with, should not exceed 25%. Commercial and thrift banks which may participate under this scheme shall secure prior clearance from CB-SES Departments I and II, respectively. SECTION 1362. Implementing Guidelines Governing the Participation of Banks Under the Intensified Rice Production Program in the provinces of Pangasinan, La Union, Ilocos Norte, Cagayan, Isabela, Nueva Vizcaya, Nueva Ecija, Pampanga, Bulacan, Mindoro Oriental and Occidental, Camarines Sur, Iloilo, Leyte, Zamboanga Sur, Bukidnon, South and North Cotabato, Davao Norte and Sultan Kudarat . a. The Trader-Miller/Input Supplier Assistance Scheme Under this scheme an Agency agreement shall be executed between the Central Bank (CB) as Administrator of the Yellow Corn Fund (YCF) and the lending institution as agent bank. The CB shall release to the agent bank amounts from the YCF which the agent bank, shall extend to the Ministry of Agriculture and Food (MAF) authorized institution trader-miller/input suppliers (TM/IS) under the conditions herein indicated. For purpose of these guidelines, the term "trader-millers" shall refer to rice "trader-millers" accredited by the Quedan Guarantee Fund Board (QGFB) who possess such primary facilities as threshers, driers, and mills and whose supply of palay could be met through contract growing or forward selling agreement with farmers. On the other hand, the term "input supplier" shall refer to enterprises which sell inputs for the production of rice to farmers, such as fertilizer, recommended seeds, pesticides and other chemicals. 1) The TM/IS shall submit his project proposal to MAF/INFAC for evaluation and approval. Upon approval of the proposal, the TM/IS shall advance the production inputs in the form of seeds, fertilizers and chemicals as well as the amount representing the insurance premiums for the project of the farmer-borrowers. A tie-up with an agricultural input supplier will insure timely and adequate provision of production inputs and provide the necessary technical assistance to complement the services of the MAF technician. The TM/IS shall require farmers to sign contracts to deliver the specified volume of their produce at a mutually agreed price which shall not be lower than the government's support price. The TM/IS shall enter into a "payment-in-kind" agreement with the NFA wherein the TM/IS shall deliver milled rice equivalent to the amount of loan the (TM/IS) availed of based on a mutually agreed price to a designated warehouse of the NFA. 2) The amounts to be released by the agent bank shall be equal to the amounts released by the TM/IS to the farmer-borrowers for the latter's cost of production inputs and crop insurance premium, determined as valid for financing by the MAF/CB, as supported by the certificates of insurance cover, promissory notes, marketing contracts and delivery receipt on inputs duly signed by the farmer-borrowers and which amounts shall not exceed the IRPP loan budget of P3,000 per hectare, broken down as follows: Seeds P400, Fertilizer P1,675, chemicals P775 and Crop Insurance Premium P150. However, a TM/IS may, at his discretion, provide additional cash loans to cover labor costs but such additional outlay will not be eligible for financing. 3) An interest rate of 6% p.a., inclusive of commission and service fees, shall be charged by the agent bank on amounts released to the TM/IS. The interest rate of 6% p.a. shall be collected upon payment by the TM/IS to the agent bank. The agent bank shall, upon collection of the loan deduct for its own account a service fee of 1% p.a. on the amount released and a commission of 2% p.a. on the amount collected excluding interest and other charges. The balance of the amount collected including interest after deducting the aforementioned service fee and commission shall be remitted to CB by the agent bank. On the other hand, loans to farmer-borrowers shall bear an interest rate of 15% per annum, inclusive of service fee and other charges. 4) The TM/IS must repay the principal and the prescribed interest thereon to the agent bank within 250 days from the date that the agent bank credits the account of the TM/IS. Loans to farmer-borrowers, however, shall have a maturity period of 240 days. The agent bank shall, within one (1) banking day from receipt of payment from the TM/IS, remit to CB such payment as specified in Item 3 above. In case of check payments the agent bank shall remit to CB the payments of the TM/IS within one (1) banking day after clearing of such checks except those withdrawn against the agent bank's head office. 5) Loans granted to farmer-borrowers shall be fully covered by insurance (2% of 125% of specified loan budget) in accordance with existing regulations of the Philippine Crop Insurance Corporation (PCIC). 6) Cut-off dates for lending/plantings (December 31, 1984) for the November-December planting and March 31, 1985 for the February-March planting shall be strictly adhered to in accordance with existing guidelines. 7) The agent bank shall release the amount to the TM/IS within one (1) banking day after the former receives the credit advice from CB. The agent bank must release to TM/IS 100% of the amount released by the CB for the particular transaction. Any unreleased portion thereof shall be returned to the CB within two (2) banking days after receipt of the credit advice. If the agent bank fails to return to CB the unreleased portion within the prescribed period, it shall pay a penalty fee of 36% p.a. on the unreleased portion in addition to the 6% p.a. interest until such unreleased portion is remitted in full to the CB. 8) Any misappropriation of funds not released to TM/IS and/or payments received from TM/IS shall subject the agent bank and its officers responsible therefor to administrative and penal sanctions under the law. 9) The agent bank shall not be held liable in case of non-payment/short-payment/late-payment by the TM/IS of the amount released by the former to the latter. 10) In the event of non-payment/short-payment/ late-payment by the TM/IS, the agent bank shall institute collection measures/legal actions against the TM/IS. All expenses covering such measures/legal actions shall be for the account of the YCF. 11) The agent bank shall keep separate books of accounts to record transactions under this scheme which shall be subject to inspection and examination by the CB-SES Department III. The agent bank shall report all transactions under this scheme to the CB on a monthly basis or as otherwise required by the CB. LibLex 12) All amounts released under the YCF to the agent bank shall be exempt from all reserve requirements and the Single Borrower's Loan Limit. 13) Only agent banks that shall be cleared by the CB-SES Department concerned shall be eligible to participate under this scheme. b. The Banking System Assistance Scheme CB as Administrator of the Yellow Corn Fund (YCF) shall release Special Time Deposits (STDs) to MAF/CB authorized banks for relending directly to qualified farmers. 1) Only banks authorized by the MAF which meet the CB eligibility requirements may avail of STDs by filing an application with the CB-SES Department III covering the credit needs of farmers, excluding seed producers, equivalent to the cost of production inputs and farmer's share of the crop insurance premium. Such amounts shall not exceed the loan budget of P3,000 per hectare. However, a farmer-borrower, upon the discretion of the lending institution, may avail of cash loan up to a maximum of P800 per hectare chargeable against the allocation for seed and fertilizer, provided, further that soil analysis and/or use of azolla has been duly certified by the supervising MAF technician. 2) With assistance from the lending bank, the farmer-borrower shall enter into a marketing contract with a QGFB accredited TM/quedan operator who shall collect for the lending bank the farmer-borrower's repayment-in-kind for production loans. 3) STD funding will be 100% of loans to farmers which shall not be eligible for rediscounting with the CB. 4) CB-SES Department III shall process STD applications and shall release such STDs to the participant banks through credit advice. 5) The participant bank shall release loans to qualified farmers duly certified/endorsed by the MAF technicians. The loans shall bear an interest rate of 15% p.a. and shall be paid in two (2) installments within 240 days. The first installment equivalent to one third (1/3) of the principal loan plus interest shall be payable (in cash or in kind) after the first harvest of the first crop or within 120 days from date of loan availment. The balance plus interest shall be remitted upon maturity of the loan or within 240 days. 6) The CB shall charge the participant bank an interest rate of 3% per annum on the STD which shall be repaid in two (2) installments within 250 days from date of receipt of credit advice. The first installment equivalent to one third 1/3 of the principal loan granted plus interest shall be payable after the harvest of the first crop or within 130 days from date of STD availment. The balance plus corresponding interest shall be remitted upon maturity of the STD or within 250 days. 7) Loans granted to farmer-borrower shall be fully covered by insurance (2% of 125% of specified loan budget) in accordance with the existing rules of Philippine Crop Insurance Corporation (PCIC). 8) Cut-off dates for lending/planting (December 31, 1984 for the November-December planting and March 31, 1985 for the February-March planting) shall be strictly adhered to in accordance with existing guide lines. 9) The participant bank shall release the STDs within 30 days from receipt thereof, and any unused portion shall be immediately returned to the CB-SES Department III within two (2) days after the 30-day period. Any participant bank which fails to return the unused amount within this period shall pay a penalty at the rate of 39% per annum, in addition to the 3% p.a. interest until such amount is remitted in full to the CB. Similarly, any unauthorized use of the STD or non-payment/ non-remittance of collections from farmer-borrowers after the 250-day term of the STD shall subject the participant bank to a penalty of 39% per annum in addition to the 3% p.a. interest until the full amount is remitted to CB, except those amount which may be covered by indemnity payments by PCIC. 10) Any misappropriation of any STD received by the participant bank from the CB and/or payments made by the farmers to the bank shall subject the bank and its officers responsible therefor to administrative and penal sanctions under the law. 11) The participant bank shall be held liable for non-payment/short-payment/late payment by the farmers of the amount released by the former to the latter. 12) In the event of non-payment/short-payment/ late-payment of the farmer, the participant bank shall institute collection measures/legal action against the farmer. 13) Rural Banks participating under this scheme should meet the following eligibility requirements: a) There are no irregularities/serious exceptions in its operations; b) Its risk asset ratio should not be less than 10% after taking into account the loans that will be granted under the IRPP; c) Its ratio of past due loans to total loan portfolio, excluding past due CB:IBRD loans, should not exceed 50%; and d) Its past due obligations with CB, if any, should be covered by approved plans of payment that are duly complied with. Commercial and thrift banks which may participate under this scheme shall secure prior clearance from CB-SES Departments I and II, respectively. SECTION 1363. Implementing Guidelines Governing the Participation of Banks in Financing Post-Harvest Facilities for the Agricultural Productivity Programs of the Government . Under this financing arrangement, the role of the participant bank is to act as Agent. The prospective borrower, upon submission of his project proposal to the Ministry of Agriculture and Food (MAF)/National Food and Agriculture Council (NFAC), should indicate, among other things, the agent bank of his choice. The MAF/NFAC is charged with the responsibility of evaluating/approving the project proposal, determining and appropriating the funds needed, accrediting the agent bank after clearance with Central Bank (CB) and endorsing/sending the approved project proposal and fund appropriation advise to the CB for the release of such funds. The Central Bank, as administrator of the Yellow Corn Fund (YCF), shall release to the Agent amounts from the YCF which the Agent shall extend to MAF authorized borrower under the following terms and conditions: 1. The amounts to be released by the Agent to authorized MAF borrower shall be based on the purchase agreements, contracts, receipts and other documents for transactions in accordance with MAF-approved project proposal and project erection timetable. 2. An interest rate of 15% per annum, inclusive of service fee and commission, shall be charged by the agent on amounts released to the borrower. The interest rate of 15% shall be collected upon payment of the loan by the borrower. The agent shall, upon collection of the loan, deduct for its own account a service fee of 1% per annum on the principal amount released and a commission of 1% per annum on the principal amount collected. The balance of the amount collected after deducting the aforementioned service fee and commission shall be remitted to the Central Bank by the Agent. 3. The borrower shall pay the approved installment/amortization together with interest to the agent on the date of maturity of each installment/amortization as approved by the MAF. Installments/amortizations not paid on time shall be subject to a penalty of 27% per annum in addition to the 15% per annum interest until such amounts are fully paid to the agent. The Agent shall, within one (1) banking day from receipt of payment from the borrower remit to the CB such payments as specified in paragraph 2. In case of check payments, the agent shall remit to CB payments of the borrower within one (1) banking day after clearing of such checks except those drawn against the Agent's head office. 4. The Agent shall open a special account for the borrower within one (1) banking day after the Agent receives the credit advice from the CB. The Agent shall release to the borrower 100% of the amounts released by the CB required for the particular transactions after verification and certification of documents presented by the borrower in accordance with paragraph 1. Any unauthorized use or retention of the funds and/or payments received by the Agent not remitted to the CB within the prescribed period shall subject the Agent to a penalty of 42% per annum until such amount is remitted in full to the CB. 5. Any misappropriation of funds not released to borrower and/or payments received from borrower shall subject the Agent and its officers responsible therefor to administrative and penal sanctions under the law. 6. The Agent shall not be held liable in case of non-payment/short-payment/late payment by the borrower of the amount released by the former to the latter. 7. In the event of Participation of Banks in Financing the borrower the Agent shall institute collection measures/legal actions against the borrower. All expenses covering such measures/actions shall be for the account of the YCF. The Monetary Board in its Resolution No. 295 dated March 22, 1985. 8. The Agent shall keep separate books of accounts to record transactions under this scheme which shall be subject to inspection and examination by the CB SES Department III. The Agent shall report all transactions to the CB on a monthly basis or as otherwise required by the CB. 9. All amounts released under the YCF to the Agent shall be exempt from all reserve requirements and the Single Borrower's Loan Limit. 10. Commercial and thrift banks which may participate under this scheme should secure prior clearance from CB-SES Department I & II, respectively. 11. Rural banks which may participate under this scheme shall meet the requirements which shall be covered by a separate memorandum. (Effective April 29, 1985) . SECTION 1364-1375. (Reserved) G. EQUITY INVESTMENTS SECTION 1376. Scope of Authority a. A bank with expanded commercial banking authority may invest in the equity of allied undertakings, financial or non-financial, as well as in the equity of enterprises engaged in non-allied activities, subject to the limitations and conditions set forth below. b. A commercial bank may invest in the equity of allied undertakings, financial or non-financial. SECTION 1377. Financial Allied Undertakings a. The financial allied undertakings of a bank with expanded commercial banking authority are the following: 1) Leasing companies; 2) Banks; 3) Investment houses; 4) Financing companies; 5) Credit card operations; and 6) Financial institutions addressed/catering to small and medium-scale industries: Provided , That any such undertaking is the primary purpose for which a particular enterprise was established and the volume of its business indicates that is principally engaged in such undertaking. Section 1377 a.7 (Additional provision as provided by CBP Circular 1237 dated May 7, 1990) The prior approval of the Monetary Board shall be required in any investment by an expanded commercial bank in the equity of a financial allied undertaking. b. The undertakings enumerated above are the financial allied undertakings for commercial banks. SECTION 1378. Limits on Investments in the Equities of Financial Allied Undertakings a. The equity investment of an expanded commercial bank in a single financial allied undertaking shall be, in relation to the total subscribed capital stock and in relation to the total voting stock of the allied undertaking, ratios: Allied Undertaking Limit Commercial Banks Up to 30% Thrift banks and rural banks Up to 100% Other financial allied Up to 100%, undertakings without prejudice to the limitations prescribed in Subsec. 1378.1 b. The equity investment of a commercial bank in a single financial allied undertaking shall be, in relation to the total subscribed capital stock and in relation to the voting stock of the allied undertaking, within the following ratios: Allied Undertaking Limit Commercial banks Up to 30% Thrift banks or rural banks Up to 100% Other financial allied Up to 40% without prejudice undertakings to the limitations prescribed in Subsec. 1378.2 SUBSECTION 1378.1 Investments in other financial intermediaries performing quasi-banking functions by expanded commercial banks with quasi-banking functions . In order to minimize excessive concentration of control through stockholdings in related financial intermediaries engaged in quasi-banking functions and within the financial system as a whole, the following rules shall govern equity investments by expanded commercial banks performing quasi-banking functions, their stockholders, their wholly or majority-owned subsidiaries and/or their minority-owned affiliates in which their stockholdings exceed forty per cent (40%) of the voting stock and/or their holding companies in other financial intermediaries performing quasi-banking functions. a. Subject to existing laws, investors specified in Item c of this subsection may own up to one hundred per cent (100%) of the voting stock of financial intermediaries performing quasi-banking functions: Provided , That such investors may not own more than thirty per cent (30%) of the voting stock of a financial intermediary performing quasi-banking functions if such investors already own more than thirty per cent (30%) of the voting stock of another financial intermediary performing quasi-banking functions belonging to the same type as that of the former financial intermediary. b. An investment in any financial intermediary performing quasi-banking functions of such percentage as would not enable the investor to elect a director of the board by virtue of its own shareholding shall not be subject to the restrictions of the preceding paragraph. c. For purposes of this subsection, the investments of each of the following investors and/or any combination of investors shall be considered as one: 1) Any expanded commercial bank, including its wholly or majority-owned subsidiaries, and/or its minority-owned affiliates in which its shareholdings exceed forty per cent (40%) of the voting stock and/or its holding company, and any of its stockholders within the coverage of the following sub-paragraph; 2) (a) Any individual stockholder, and/or stockholders related to each other within the third degree of consanguinity or affinity, and/or corporations wholly or majority-owned by such individuals, or (b) any corporate stockholders, together with its wholly or majority-owned subsidiary and/or minority-owned affiliates in which its shareholdings exceed forty per cent (40%) of the voting stock, and/or its holding companies, if the stockholders specified in (a) or (b) of this sub-paragraph own more than twenty per cent (20%) of the voting stock of the expanded commercial bank, even if such bank may have no direct investment in the other financial intermediary in which said stockholders have investments. llcd d. Investment in the equity of financial intermediaries without quasi-banking functions shall not be covered by this subsection. e. Investments duly recorded in the stock and transfer books of financial intermediaries as of February 3, 1975 [the date when the regulations covering investments by financial intermediaries performing quasi-banking functions (FIQB) in other FIQB were first issued] which exceed the limitations of Item a of this subsection may be retained but shall not thereafter be increased percentage-wise, and whenever reduced, shall not thereafter be increased beyond the limitations herein established. f. Any investment previously authorized by the Monetary Board wherein a condition had been imposed that both the investor and the investee financial intermediary shall comply with whatever policy decisions the Monetary Board may promulgate regarding equity investments of financial intermediaries, in allied undertakings performing quasi-banking functions, shall comply with the provisions of this subsection within such period as the Central Bank may prescribe. SUBSECTION 1378.2 Investments in other financial intermediaries performing quasi-banking functions by commercial banks performing quasi-banking functions. In order to minimize excessive concentration of control through stockholdings in related financial intermediaries engaged in quasi-banking functions and within the financial system as a whole, the following rules shall govern equity investments by commercial banks performing quasi-banking functions, their stockholders, their wholly or majority-owned subsidiaries and/or its minority-owned affiliates in which their stockholdings exceeded forty per cent (40%) of the voting stock and/or their holding companies in other financial intermediaries performing quasi-banking functions. a. Subject to existing law, investors specified in Item c of Subsec 1378.1 shall not own more than forty per cent (40%) of the voting stock of a financial intermediary performing quasi-banking functions, nor own more than thirty per cent (30%) of the voting stock in second investment in another financial intermediary performing quasi-banking functions: Provided , however , That these two investments may not be in the same category or type of financial intermediary, such as investment houses or commercial banks: Provided , further , That an investment of more than thirty per cent (30%) of the voting stock in not more than one thrift bank performing quasi-banking functions shall not be subject to the foregoing restrictions. b. An investment in any financial intermediary performing quasi-banking functions of such percentage as would not enable the investor to elect a director of the board by virtue of its own shareholdings, shall not be subject to the restrictions of the preceding paragraph. c. Investments in the equity of financial intermediaries without quasi-banking functions shall not be covered by this subsection. d. Investments duly recorded in the stock and transfer books of financial intermediaries as of February 3, 1975 [the date when the regulations covering investments by financial intermediaries performing quasi-banking functions (FIQB) in other FIQBs were first issued] which exceed the limitations of Item a of this subsection may be retained but shall not be increased percentage wise and, whenever reduced, shall not thereafter be increased beyond the limitations herein established. e. Any investment previously authorized by the Monetary Board wherein a condition had been imposed that both the investor and the investee financial intermediary shall comply with whatever policy decisions the Monetary Board may promulgate regarding equity investments of financial intermediaries in allied undertakings performing quasi-banking functions, shall comply with the provisions of these regulations within such period as the Central Bank may prescribe. The prior approval of the Monetary Board shall be required in any investment by a commercial bank in the equity of a financial allied undertaking. SECTION 1379. Non-Financial Allied Undertakings a. The non-financial allied undertakings of a bank with expanded commercial banking authority are the following: 1) Warehousing companies; 2) Storage companies; 3) Safe deposit box companies; 4) Companies engaged in the management of mutual funds but not in the mutual funds themselves; 5) Management corporations engaged or to be engaged in activity similar to the management of mutual funds; 6) Companies engaged in the provision of computer services; 7) Insurance agencies: Provided , That no director, officer or stockholder of the bank and their related interests hold/own more than twenty per cent (20%) of the subscribed capital stock or equity of the insurance company for which the affiliate insurance acts as agent; 8) Companies engaged in home building and home development; 9) Companies providing drying and/or milling facilities for agricultural crops such as rice and corn; 10) Companies engaged in insurance brokerage: Provided , That no director, officer, stockholder of the investing bank or their related interests shall have financial interests in the insurance company/companies for which the affiliate insurance brokerage company acts as broker: Provided , That any such undertaking is the primary purpose for which a particular enterprise was established and the volume of its business indicates that it is principally engaged in such undertaking. b. The above provisions shall also apply to investments by a commercial bank in the equity of a non-financial allied undertaking SUBSECTION 1379.1 Extent of investments in non-financial allied undertakings . A bank with expanded commercial banking authority and a commercial bank may acquire up to one hundred pre cent (100%) of the equity of a non-financial allied undertaking. Prior Monetary Board approval is required if the investment is in excess of forty per cent (40%) of the total subscribed capital stock or forty per cent (40%) of the total voting stock of such allied undertaking. (As amended by BSP Circular 84 dated August 17, 1995) SECTION 1380. Investments in Non-Allied or Non-Related Enterprises a. Only a bank with expanded commercial banking authority may invest in the equity of an enterprise engaged in non-allied or non-related activities. b. A commercial bank without an expanded commercial banking authority shall not invest in the equity of enterprises engaged in non-allied or non-related activities. SUBSECTION 1380.1 Non-allied undertakings eligible for investment by expanded commercial banks . The broad category of undertakings in which an expanded commercial bank may invest in directly or through its wholly or majority-owned subsidiary shall be subject to prior approval of the Monetary Board. Initially, investment in non-allied undertaking shall be allowed in enterprises engaged in physically productive activity in manufacturing or agriculture and in public utilities. Individual equity investment in undertakings within these broad categories shall not require approval. (As amended by CBP Circular 1236 dated April 27, 1990) SUBSECTION 1380.2 Limits on investments in non-allied enterprises a. The equity investment of an expanded commercial bank, or of its wholly or majority-owned subsidiary, in any single non-allied enterprise shall not exceed thirty-five per cent (35%) of the total subscribed capital stock nor shall it exceed thirty-five per cent (35%) of the voting stock in the enterprise. cdtech For the purpose of determining compliance with the ceiling prescribed in the preceding paragraph, (i) the equity investment of the bank; (ii) the equity investment of the bank's wholly or majority-owned subsidiaries; and (iii) the equity investment of directors, officers and stockholders owning two per cent (2%) or more of the subscribed capital stock of the bank or of the bank's wholly or majority-owned subsidiaries, shall be combined. b. In no case shall the total equity investments in a single non-allied enterprise of expanded commercial banks, non-bank financial intermediaries performing quasi-banking functions, and their wholly or majority-owned subsidiaries, whether or not the parent financial intermediaries have equity investments in the enterprise, amount to fifty per cent (50%) or more of the voting stock of that enterprise; Provided , however , That equity investments in excess of the ceilings prescribed herein as of April 1, 1980 may be maintained but may not be increased and if reduced, shall not be increased thereafter beyond the ceiling prescribed herein. SUBSECTION 1380.3 Reporting requirements . Expanded commercial banks, and their wholly or majority-owned subsidiaries shall report to the Central Bank within fifteen (15) banking days from the end of every semester, their outstanding equity investment in and outstanding loans to non-allied enterprises as of the end of that semester. SECTION 1381. Other Limitations and Restrictions . The following limitations and restrictions shall also apply regarding equity investments of expanded commercial banks and commercial banks. SUBSECTION 1381.1 Expanded commercial banks . a. The total equity investments of an expanded commercial bank in any single enterprise, whether allied or non-allied, shall not at any time exceed fifteen per cent (15%) of the net worth of the investing bank. (Effective Mar. 7, 1984) b. The total amount of investment in equities made by a bank in all enterprises, whether allied or non-allied, shall not exceed fifty per cent (50%) of its net worth. SUBSECTION 1381.2 Commercial banks . a. The total equity investments of a commercial bank in any single enterprise shall not at any time exceed fifteen percent (15%) of the net worth of the investing bank. (Effective Mar . 7, 1984) b. Total amount of investment in equities that may be made by a commercial bank in all allied enterprises, whether financial or non-financial, shall not exceed twenty-five per cent (25%) of its net worth. SUBSECTION 1381.3 Investments abroad . The ceiling provided for in Subsecs. 1381.1 and 1381.2 shall apply to equity investments in and/or loans to any enterprise abroad. For purposes hereof, the phrase "equity investments in and/or loans to" shall include any accommodation that gives rise to a creditor/debtor relationship such as deposits money market placements, loans or any advances or any amount of funds granted or remitted by a domestic bank to its subsidiary/affiliate abroad including letters of comfort and deposits/placements abroad of the domestic bank which are hypothecated. Any bank with total investments in or outstanding loans to any enterprise abroad exceeding the fifteen per cent (15%) limit shall have one (1) year within which to comply with the ceiling prescribed herein. (Effective April 11, 1983) SECTION 1382. Exclusion of Underwriting Exposure from Ceiling . The exposure of a bank with expanded commercial banking authority arising from the firm underwriting of equity securities of enterprises shall not be counted in determining compliance with the ceilings prescribed in Secs. 1380 and 1381 for a period of two (2) years from the acquisition of such equity securities. SECTION 1383. General Provisions a. A bank shall not invest in the equity of any enterprise, if the investing bank itself is in any of the following situations: 1) its capital is impaired, whether by actual losses or unbooked valuation reserves required by the Central Bank; 2) Its lending operations had been suspended on account of reserve or capital deficiency, until such suspension shall have been lifted for at least one year and sufficient reserves or capital shall have been maintained; 3) It incurred losses from its operations during the preceding year; 4) It has not fully booked the valuation reserves and other capital adjustments required by the Central Bank; 5) It has exceeded the individual and aggregate ceiling as well as the ceiling on unsecured credit accommodations to directors, officers and stockholders, and their related interest; and 6) Its ratio of past due loans to total loan portfolio exceeds 20%. b. The conditions, requirements and limitations on investments by a bank in the equity of a venture capital corporation shall be governed primarily by the provisions of Presidential Decree No. 1688 and applicable regulations on the such investment. (As amended by CBP Circular 1366 dated November 16, 1992) SECTION 1384. Investment in Venture Capital Corporations (VCCs) . The following rules and regulations shall implement Presidential Decree No. 1688 Authorizing Banks to Invest in the Equity of Venture Capital Corporations to Assist Small and Medium-Scale Enterprises". SUBSECTION 1384.1 Requirements for investors . Banks may invest in a venture capital corporation (VCC) organized to assist small and medium-scale enterprises, subject to the following conditions: a. The bank shall have a minimum paid-in capital of P100 million. In addition, the total of paid-in capital (including paid-in surplus), earned surplus and undivided profits, net of (1) such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank and (2) total outstanding unsecured credit accommodations, both direct and indirect, to directors, officers, stockholders, and their related interests (DOS-RI) shall not be less than P100 million. Any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of bank assets shall be excluded. b. Banks, singly or with other eligible banks, may own up to sixty per (60%) of the total voting equity and of the total equity of a VCC: Provided , That a bank shall not be allowed to invest in the equity of more than one VCC. c. The initial paid-in capital of VCC shall not exceed five million pesos (P5,000,000.00). Any subsequent increase in paid-in capital of the VCC in which a bank owns equity shall be subject to prior approval of the Monetary Board. d. Loans which the investor-bank may grant to a VCC shall be limited to such amounts as would enable the VCC to promote equity financing to viable small and medium-scale enterprises: Provided, however , That unless otherwise authorized by the Monetary Board, the aggregate outstanding loans of such bank to a VCC shall not exceed twice the Amount of its equity investment in the VCC: Provided , further , That loans to the VCC, or the small and medium-scale enterprises shall not be subject to the ceilings on DOSRI, except where bank DOSRI are likewise stockholders in the VCC or in the small and medium-scale enterprise. e. The combined equity investments in, and loans of, the bank to its VCC shall not exceed 15% of the bank's net worth. f. The aggregate investments in equities by a bank, including equity investments in a VCC, shall not exceed the prescribed ceiling of 25% of the bank's net worth. For purposes of this section, a venture capital corporation shall refer to an entity organized jointly by private banks, the National Development Corporation and the Technology Resource Center and/or such other government agency as may be authorized by the appropriate authority, the primary purpose of which is to develop, promote and assist, thru debt or equity financing or any other means, any small and medium scale enterprise in the country. SUBSECTION 1384.2 Authorized investments of VCCs . Equity investment of a VCC in small and medium-scale enterprises shall be subject to the following conditions: a Equity financing by a VCC may be extended to a "small and medium-scale enterprise" engaged in an industry certified as desirable by the Ministry of Trade and Industry. b. The total assets of the enterprise shall not exceed P4 million, including VCC's equity investment. Should the total assets of the small and medium-scale enterprise subsequently exceed the prescribed P4 million maximum, the VCC equity investment therein made before the total assets of the enterprise exceeded P4 million, may be maintained but shall not be increased. SUBSECTION 1384.3 Business name of VCC . A VCC shall be known by any name not otherwise appropriated: Provided , however , That the words "venture capital corporations" are made a part thereof. SUBSECTION 1384.4 Reportorial requirements; examination by Central Bank . A VCC in which a bank owns equity shall be subject to Central Bank reportorial requirements prescribed for non-bank financial intermediaries and may be subject to examination by the Central Bank. SUBSECTION 1384.5 Interlocks . Subject to prior approval of the Monetary Board, a person may concurrently hold the position of director or officer in bank and a VCC. SECTIONS 1385-1387. (Reserved) H. OTHER OPERATIONS SECTION 1388. Purchase of Receivables and Other Obligations . The provisions of Section 21 of Republic Act No. 337, as amended, shall govern the purchase or receivables and other obligations. SUBSECTION 1388.1 Yield on purchase of receivables . The rate of yield, including commissions, premiums, fees and other charges, from the purchase of receivables and other obligations, regardless of maturity, that may be charged or received by banks authorized to engage in quasi-banking functions or by non-bank financial intermediaries authorized to engage in quasi-banking functions, shall not be subject to any regulatory ceiling. Data on the volume and interest rates of domestic loans and discounts with original maturities of more than 365 days shall be reported by expanded commercial banks and commercial banks to the Department of Economic Research, Domestic, Central Bank of the Philippines, not later than the 15th banking day after end of reference month. (Effective December 10, 1982) . cdta SUBSECTION 1388.2 Purchase of receivables on a "without recourse" basis . The total exposure of a bank to a maker of promissory notes resulting from the purchase of receivables on a "without recourse" basis shall be subject to the single borrower's loan limit of the bank: Provided , That the purchaser shall evaluate the credit worthiness of the maker of such promissory notes (Effective Oct. 15, 1985) . SUBSECTION 1388.3 Purchase of Commercial Paper . Before purchasing registered commercial paper, banks shall: "(a) Require the issuing entity to submit a duly certified true copy of its Certificate of Registration and Authority to Issue Commercial Paper; and "(b) Ascertain that the registration number and expiry date indicated in the commercial paper are the same as those in the Certificate of Registration submitted. "Any violation or failure to comply with the provisions of this subsection shall subject the erring bank to suspension or revocation of its authority to engaged in quasi-banking functions. ( Effective April 29, 1985 ). SECTION 1389. Open Market Operations . The following rules and regulations shall govern the buying and selling of government securities in the open market. a. The Central Bank shall engage in open market operations in accordance with the principles stated in Section 96 of Republic Act No. 265, as amended. in order to achieve the objectives of the national monetary policy. b. Except as otherwise provided under item i hereof, purchases and sales in the open market shall be made only through accredited government securities dealers. (Effective January 3, 1983) . The Central Bank may buy and sell for its own account: (1) Evidences of indebtedness issued directly by the Government or its political subdivisions; and (2) Evidences of indebtedness issued by government instrumentalities and fully guaranteed by the Government. The above evidences of indebtedness must be freely negotiable and regularly serviced. c. Accreditation shall take the form of an agreement by and between the Central Bank and the government security dealer whereby in consideration of certain privileges to be granted by the Central Bank, such as inventory financing, the latter shall perform marketing and monitoring responsibilities. d. Outright purchases and sales of CBCIs and other government securities shall be: 1) Posted daily quotations for the last three (3) weeks on the particular type of government securities for which financing is being applied for; 2) Traded on the said government securities in an amount equivalent to 50% of its inventory as of the date of its application, during the last preceding three (3) weeks; and (3) No record of default or delay in the settlement of any repurchase agreement. g. Reverse repurchase agreements covering the sale of portions of the security holdings of the Central Bank Portfolio may be made for terms under Subsec. 1389.4. h. Swaps of CBCIs and other government securities of different maturities shall be made only after taking into account appropriate price adjustments. SUBSECTION 1389.1 Exclusive transactions thru government securities dealers . Availments of the regular repurchase facility of the Central Bank as well as outright purchases by the Central Bank government securities in the open market and sales from its security holdings shall be made exclusively through CB accredited dealers in government securities. However, the special lending facility shall remain open to all banks and non-banks performing quasi-banking functions and the auctions of government securities by the Central Bank shall remain open to the public. SUBSECTION 1389.2 Market making by government securities dealers . For purposes of discharging their responsibility of making markets in government securities, accredited dealers shall perform any of the following: a. Regularly post 2-way quotes on all series of marketable government securities; b. Regularly post 2-way quotes only on all series of government securities in their inventories; or c. Specialize and post quotes only on specific types of securities. Intervention by the Central Bank either through open market sale or purchase shall be effected through telephone open auction "go-around" method. 1389.3 Regular repurchase agreements Regular repurchase agreements may now be effected with the Central Bank which shall be subject to the following terms and conditions: a. Rate . The highest rates obtained through the "go-around" method for specified maturities. b. Term . The term shall be for a period not exceeding 15 days. c. Security . Only obligations of the National Government and of its instrumentalities and subdivisions, which are fully guaranteed by the Government, with a remaining maturity of not more than 10 years and which are freely negotiable and regularly serviced, shall be eligible as underlying instruments for re-purchase agreements subject to the following collateral requirement: Maturing in less than 90 days 100% Maturing in less than 180 days 105% Maturing in less than 360 days 110% Maturing in less than 720 days 115% Maturing in less than 10 yrs. 120% d. Delivery . Delivery of the underlying instruments shall be made to the Central Bank not later than 3:00 P.M. of the date of sale. The proceeds of the repurchase agreement shall be subject to the agrarian credit requirement as prescribed under Sec. 1341. SUBSECTION 1389.4 Reverse repurchase agreements with CB . Reverse repurchase agreements which may now be effected with the Central Bank shall be subject to the following terms and conditions. a. Rate . The lowest rates obtained through the "go-around" method. b. Term . The term shall be for a period not exceeding 10 calendar days. c. Security . The collateral shall consist of obligations of the National Government in the CB portfolio valued at 100%. d. Delivery . No delivery of the collateral shall be made, but a custody receipt shall be issued instead. e. Reservation . Prepayment may be made by the CB at its option any time before maturity. SECTIONS 1390-1392. (Reserved) I. MISCELLANEOUS PROVISIONS SECTION 1393. Investment Deposit Ratio . The following policies and guidelines shall govern the investment-deposit ratio of branches, agencies, extension offices, etc., and/or head offices in the provinces, of commercial and thrift banks. (As amended by Section 1 of CBP Circular 1183 dated September 15, 1988) SUBSECTION 1393.1 Statement of policy . At least 75% of total deposits accumulated by branches, agencies, extension offices, etc., and/or head offices of commercial and thrift banks in a particular region (outside Metropolitan Manila) shall be invested therein as a means to develop that region. (As amended by Section 2 of CBP Circular 1183 dated September 15, 1988) cdti SUBSECTION 1393.2 Methods of compliance . In case a bank has two or more offices (i.e., head office and/or branches, etc.) in a particular regional grouping, the policy may be deemed complied with if the aggregate investment of such bank's offices is not below 75% of its aggregate deposit held in that region: Provided, however , That the bank may be permitted to devote at least 60% of said 75% ratio of aggregate investment to loans for the financing of agricultural and export industries: and, Provided , further , That any bank which finds difficulty to comply with this requirement may be permitted to make arrangements with any government financial institution that may be willing to transfer some of its loan accounts to the said bank so that the surplus funds of such bank may be properly invested in that area: Provided , finally , That loans granted by offices in a region may be assigned and considered part of the loans/investments of offices in another region, subject to the presentation of acceptable proof that the end-users of the loan proceeds are located in the latter region. Acceptable proof may include but need not be limited to the following: (a) ticket showing that the loan proceeds were released by an office in that region and/or (b) cable advice from the lending office to the office in the region where end-users are located re: approval of loan and release thereof. (As amended by Section 3 of CBP Circular 1183 dated September 15, 1988) SUBSECTION 1393.3 Government securities as eligible investments . Investments in Central Bank Certificates of Indebtedness (CBCIs) and in national or local government securities (including but not limited to, Land Bank Bonds, Treasury Notes, Treasury Bills and DBP Countryside Bills) are considered eligible for purposes of this policy: Provided , That the total credits or loans and discounts to the private sector shall not fall below 50% of total deposits. (As deleted by Section 4 of CBP Circular 1183 dated September 15, 1988) SUBSECTION 1393.4 Clarifications . Investments in bank premises, furniture and equipment, and other real and chattel properties may not be considered as among the investments for this purpose. Government deposits and deposit of banks lodged in "Due to Banks" shall be included in computing the total accumulated deposits. (As deleted by Section 5 of CBP Circular 1183 dated September 15, 1988) SUBSECTION 1393.5 Sanctions for non-compliance Compliance with the investment-deposit ratio for four consecutive quarters shall be one of the conditions for the processing and/or approval of any of the following applications or requests of commercial banks: a. For authority to establish new banking offices, regardless of type or category, in or out of the Greater Manila area; b. For permit to operate new banking offices, regardless of type or category, in or out of the Greater Manila area; c. For authority to utilize unmatured export bills for purposes of reserve against marginal deposits; and d. To avail of Central Bank credit facilities, except as may be allowed under Section 90 of Republic Act No. 265, as amended. (As amended by Section 6 of CBP Circular 1183 dated September 15, 1988) SUBSECTION 1393.6 Regional groupings . The twelve (12) regional groupings shown in Appendix 29 shall be used for purposes of determining the regional retention of deposits. (As amended by Section 7 of CBP Circular 1183 dated September 15, 1988) SUBSECTION 1393.7 Reporting requirements . A report on the "Computation of Investment Deposit Ratio of Branches, etc. and/or Head Offices of Commercial Banks in the Provinces" shall be made as accompanying schedule to the banks' "Statement of Condition (Consolidated)" every quarter. (As deleted by Section 8 of CBP Circular 1183 dated September 15, 1988) SUBSECTION 1393.8 Grace period . For purposes of determining compliance with the investment-deposit ratio, banks shall be granted a six-month grace period from every reporting date within which to invest their loanable funds. (Additional provision as provided by Section 9 of CBP Circular 1183 dated September 15, 1988) SECTION 1394. Assets Acquired in Settlement of Loans . All commercial banks shall post at all times in a conspicuous place on the premises of its head office and each of its branches and other banking offices a list of acquired assets together with the corresponding lowest price at which the bank is willing to sell such property. However, this requirement shall not relieve the banks from the requirement under Section 25 of Republic Act No. 337, as amended, to dispose of such acquired assets. SECTION 1395. Credit Policies of Government-Owned Corporations . Pursuant to Sections 2 and 114 of Republic Act No. 265, as amended, government-owned corporations which perform banking or credit functions shall coordinate their general credit policies with the Schedule of Credit Priorities embodied in Appendix 30. Within the provisions of their respective charters, these corporations shall limit their credits to the economic activities falling under Priority II of said schedule to 50% of their outstanding loans at any time. SECTION 1396. Parcellary Plans on Crop Loans All banking institutions are required to make the submission of parcellary plans a requisite for the purpose of granting crop loans to sugarcane planters starting Crop Year 1978-79. SECTIONS 1397-1398. (Reserved) SECTION 1399. General Provision on Sanctions Unless otherwise provided, any violation of the provisions of this Part shall be subject to the provisions of Sections 34 and 34-A of Republic Act No. 265, as amended. cdlex * Copied verbatim from documents obtained directly from the Bangko Sentral ng Pilipinas Footnotes 1. This can be determined by dividing twelve, the number of months in a year, by the number of fraction of months between installment payments. PART FOUR Trust and Other Fiduciary Functions A. TRUST OPERATIONS SECTION 1401. ( Reserved ) SECTION 1402. Scope of Trust Regulations . These regulations shall govern the trust operations of trust companies, banks and investment houses. SUBSECTION 1402.1 Definitions . For purposes of these regulations, unless the context clearly connotes otherwise, the following shall have the meaning indicated: a. Trust operations or trust business shall refer to the administration, holding and management by a trustee of funds and/or property for the use, benefit, or advantage of the trustor or of others called beneficiaries. b. Trust account shall refer to the transactions arising from the fiduciary relationship established between a trustor and a trust company, a bank or an investment house authorized to administer and manage a particular fund and/or property as trustee. c. Investment authority shall refer to the power conferred by law, court order, or governing trust instrument to make, select or change investments. d. Common trust fund . A common trust fund is a fund maintained by a trust company, bank or investment house authorized to perform trust functions, exclusively for the collective investment and reinvestment of certain moneys received in its capacity as trustee. SECTION 1403. Pre-requisites for Engaging in Trust Business . A trust company, bank or investment house before it may engage in trust business shall comply with the following requirements: a. The applicant is authorized in its articles of incorporation to engage in trust business. The specific duties and responsibilities of the Committee or officers entrusted with management and supervision of trust operations shall be provided in the by-laws or in a resolution duly passed by the board of directors. b. Before transacting trust business, the applicant shall deposit with the Central Bank cash or eligible securities amounting to at least P250,000.00 as security for the faithful performance of trust duties, in accordance with the requirements of Sec. 1404 hereof. c. In the case of a bank or investment house, the applicant must also show that: 1) It has complied with the minimum capitalization requirements under existing regulations; 2) Its operations during the year immediately preceding the filing of the application have been reasonably profitable; 3) It has not exceeded the ceilings on credit accommodations to directors, officers, stockholders and their related interests for three (3) or more times during the year previous to the filing of application nor at any time while application is being processed; 4) Its net worth has not been deficient for five (5) or more times within a thirty (30) day period during the last six (6) months immediately preceding the date of filing the application nor at any time while the application is being processed. In case of deficiency, the application shall not be processed for the next sixty (60) calendar days without prejudice to its revival/re-submission after said period; 5) Its net worth has not been deficient continuously for a period of thirty (30) days or more during the last twelve (12) months immediately preceding the date of filing the application or at any time while the application is being processed. In case of deficiency, the application shall not be processed for the next twelve (12) months without prejudice to its revival/re-submission after said period; 6) It has not incurred net deficiencies in reserves against deposit/deposit substitute liabilities for four (4) consecutive weeks preceding the date of filing the application nor at any time while the application is being processed. In case of deficiency, the application shall be processed only after it shall have had no net reserve deficiencies for eight (8) consecutive weeks: Provided , That in case the applicant has incurred net deficiencies in reserves for eight (8) consecutive weeks during the last twelve (12) months immediately preceding the date of filing the application, said application shall not be processed for the next twelve (12) months without prejudice to its revival/re-submission after said period; and 7) It has shown substantial compliance with pertinent laws, rules, regulations, policies and instructions of the Central Bank. SECTION 1404. Security for the Faithful Performance of Trust Duties . The deposit as security for the faithful performance of trust duties required under Item b of Sec. 1403 shall be increased or decreased on the basis of the end-of-month average of trust assets held by the trustee during the immediately preceding semester as follows: Volume of trust assets Required trust deposit (In million pesos) with the Central Bank P35.500 and below P250,000 35.501 but not over P71.000 500,000 P71.001 but not over 106.500 P750,000 106.501 but not over 142.000 1,000,000 A deposit of P250,000.00 shall be required for every additional P35.5 million of trust assets in excess of P142 million: Provided , however , That an additional deposit of one per cent (1%) of trust assets representing common trust funds shall also be deposited with the Central Bank from which common trust funds shall have preferred claims. The increase in the deposit shall be made by the trustee within sixty (60) days from the end of the immediately preceding semester. Securities which may be deposited as security for the performance of trust duties shall consist of bonds issued by the Republic of the Philippines or by the Central Bank or bonds the servicing and repayment of which are fully guaranteed by the Republic of the Philippines: Provided , That other kinds of securities may be declared eligible by the Monetary Board. SECTION 1405. Non-trust Agreements . An agreement or instrument containing any or all of the following features shall not be construed as an agreement constituting a trust relationship: a. Where the risk or responsibility is exclusively with the trustee in case of loss in the investment of the trust funds when such loss is not due to the failure of the trustee to exercise the skill, care, prudence and diligence required by law; b. Where there is a fixed rate of interest or return or there is a guarantee of income, although indeterminable, in favor of the trustor or beneficiary: Provided, however , That trust arrangements where funds are disposed of in fixed-income generating investments or debt instruments shall not be considered non-trust agreements when the agreement categorically states that the fixed rate of interest or return thereon is neither assured nor guaranteed by the trustee but is for the account and risk of the trustor or beneficiary; c. Where the duties of the trustee are merely advisory or recommendatory or are purely ministerial in nature; and d. Where there is a preponderance of purpose or of intent that the agreement or instrument creates a relationship other than that of a trustor-trustee relationship, as determined by the Governor or Monetary Board upon the findings and recommendations of the appropriate supervising and examining department of the Central Bank. SECTION 1406. Mergers and Consolidations . In mergers and consolidation of financial institutions one or more of which have authority to engage in trust operations, the surviving or the consolidated institution, as the case may be, may continue performing trust operations subject to evaluation by the appropriate supervising and examining department of the Central Bank, taking into account the pertinent requirements of Sec. 1403 hereof. SECTION 1407. Responsibilities of Administration The following guidelines shall govern the responsibilities of the board of directors, officers, committees, or officer-in-charge in the administration of the trust: SUBSECTION 1407.1 Board of Directors . The board of directors shall have general authority and responsibility for the proper administration and management of trust business. It shall determine and formulate policies with regard to the proper management of each trust account, which may include investment, re-investment and disposition of funds or property, and the review of the actions of all officers, employees and committees designated to manage said accounts. The board of directors may delegate responsibility for the acceptance relinquishment, review or management of trust accounts to a committee or officer: Provided, however , That the board of directors shall be held responsible in general for all acts of such committee or officer. SUBSECTION 1407.2 Officers . Trust operations shall be under the supervision of officers who shall, in addition to meeting the qualification standards prescribed for officers of banks or NBQBs, possess the necessary technical expertise in trust business. SUBSECTION 1407.3 Committees ; Officer-in-Charge The responsibility for trust transactions may be delegated by the board of directors to a committee whose members shall preferably not be involved in other operations of the bank or the investment house, or to an officer-in-charge who shall not be involved in other operations of the trustee institution. The committee duly constituted or the officer duly authorized by the board of directors shall act within the sphere of authority which may be delegated by the Board such as acceptance or release of trust accounts; the initial review of assets placed under the trustee's custody, the investment, reinvestment and disposition of funds or property; continuous review to determine the advisability of retaining or disposing of assets for an account which must be done at least once every twelve (12) months, and/or to determine whether the account is being managed in accordance with the instrument creating the trust. SECTION 1408. Transactions Requiring Prior Authority . Unless prior to its execution the specific transaction has been expressly authorized in writing by the trustor, beneficiary or other party in interest, or by a court of competent jurisdiction, the trustee shall not undertake any or all of the following transactions for the account of a trust: a. Purchase or acquire property from, or otherwise sell, transfer, assign or lend money or property to any of the departments, directors, officers, stockholders, or employees of the trustee or relatives within the first degree of consanguinity or affinity, or the related interests of such directors, officers and stockholders; b. Invest in equities or purchase debt instruments of the trustee or of a corporation in which the trustee owns at least fifty percent (50%) of the subscribed capital or voting stock in its own right and not as trustee, nor in a representative capacity, or purchase debt instruments of its directors, officers, stockholders, their relatives within the first degree of consanguinity or affinity or their related interest, or of its employees; and c. Sell, transfer, assign or lend money or property from one trust account to another trust account. d. Commingle trust funds for the purpose of complying with the prescribed minimum denomination or principal amount of a duly registered commercial paper. ( Effective April 29, 1985 ). In obtaining the authority, the relationship of the trustee and the other party involved in the transaction shall be fully disclosed in writing to the trustor, beneficiary, party in interest or the court concerned. Such disclosure together with the authority shall be considered as part of the instrument creating the trust. Directors, officers, stockholders, their relatives or related interests covered by this section shall be those considered as such under existing regulations on loans to directors officers, etc. of banks and NBQBs. The procedural and reportorials requirements in said regulations must be complied with in case of transactions involving persons and entities mentioned in Items a and b of this section. SECTION 1409. Ceilings on Loans ; Other Requirements . Trust loans shall be subject to: a. The loan limit to a single borrower prescribed under existing laws/regulations for banks or investment houses, as the case may be; b. Quantitative ceilings provided under existing laws whenever applicable, and loan ceilings to DOSRI as prescribed under existing regulations for banks and investment houses, as the case may be; and c. The requirements of Sections 76 and 77 of Republic Act No. 337, as amended. For purposes of computing the single borrower's limit, the total loans granted by the trust department and by the bank or investment house proper to the same person, firm or corporation shall be reckoned with. SECTION 1410. Disposition of Accounts ; Limitations on Loans and Investments . Assets received in trust or on deposit for the use, benefit or behoof of others by a trust company, a bank or investment house shall in general be administered in accordance with the terms of the instrument creating the trust; Provided , That no trust account involving funds of the Government, its branches, agencies, subdivisions instrumentalities, including government-owned or controlled corporations, shall under any circumstance be accepted under a "Bearer account," "Numbered Account" or other similar arrangement. LLjur When the trustee is granted discretionary powers in the disposition of trust accounts, and unless otherwise directed in the trust instrument, loans and investment of trust funds shall be limited to the following transactions: a. Loans secured by a hold-out on, assignment or pledge of deposits maintained either with the trustee or other banks, or of deposit substitutes of the trustee itself or mortgage and chattel mortgage bonds issued by the trustee: Provided , That clean loans for personal and household finance may be granted, but which shall not exceed the borrower's deposit/deposit substitute with the trustee plus his four months' salary or regular income in the case of a permanent employee or wager earner; b. Medium-term loans (1) For livestock breeding and production, with maturities up to three years secured by a lien on the animals, in an amount not exceeding fifty per cent (50%) of the commercial value of the animals at the time the loan is made but similar additional loan up to fifty per cent (50%) may be made as the value of the stock increases; or (2) For the acquisition of fertilizers and any instruments, machinery and other movable equipment used in the production, processing, transformation, handling or transportation of agricultural and industrial products, with maturities up to five years, secured by the assets acquired with the proceeds of the loan: Provided , That for both types of loans, the trustee may require as additional security a lien or mortgage on other properties of the debtor: Provided , further , That said liens need not be constituted if the borrower executes a mortgage on real estate property seventy per cent (70%) of the appraised value of which equals or exceeds the amount of the loan granted; c. First Mortgage loans (1) For the construction, acquisition, expansion or improvement of rural and urban properties, or for the refinancing of similar loans and mortgages, with maturities of not more than twenty (20) years; or (2) For the conservation, enlargement or improvement of productive properties, or the acquisition of machinery or other fixed installations, with maturities up to ten (10) years; or (3) For such other purposes as may be prescribed by the trustee provided the amount of the loan shall not exceed sixty per cent (60%) of the appraised value of the real estate and insured improvements thereof, securing such loan; d. High-grade bonds and other evidences of indebtedness, and loans against such obligations; e. Drafts, bills of exchange, acceptances, or notes arising out of current commercial transactions which are endorsed or accepted by any solvent bank operating in the Philippines provided the aggregate investments in this class shall not exceed ten per cent (10%) of the total trust assets of the trustee; f. Collateral trust bonds or notes, or obligations secured by such bonds or notes, secured by a first mortgage or by a participating interest in a first mortgage on improved urban or rural real estate in cities and municipalities of the Philippines: Provided , That such bonds and notes shall have been outstanding for at least three (3) years prior to their purchase by the trustee: Provided, further , That during that period the earnings of the property mortgaged and available for paying interest have been equal to at least two hundred percent (200%) of the annual interest payable on account of all first mortgage obligations outstanding. No such bonds or notes, or obligations secured thereby, shall be purchased by the trustee if the aggregate of first mortgage obligations outstanding against the property exceeds seventy per cent (70%) of the appraised value thereof; g. Loans secured by the pledge to the corporation of gold or silver bullion: Provided , That the loans shall not exceed ninety per cent (90%) of the value of the pledge by which the loan is secured; h. Equities of allied undertakings as may be approved by the Monetary Board for banks; and i. Other loans and investments as the Monetary Board may allow. In the case of government funds, investment shall be limited to: a. Treasury notes or bills, Central Bank Certificates of Indebtedness and other government securities or bonds, and such other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines; b. Repurchase agreements with any of those mentioned in Item a above, as underlying instruments thereof; c. Savings or time deposits with government-owned banks: Provided , That in no case shall any such savings or time deposit accounts be accepted or allowed under a "Bearer", "Numbered Account" or other similar arrangement; and d. Other investments as the Monetary Board may allow. SECTION 1411. Separation of Accounts . All moneys, properties or securities receded by any trustee as such shall be kept separate and distinct from all other funds, properties and assets of its general business and shall be under the joint custody of at least two officers and employees in charge of trusts. The trust operation shall have books and records separate and independent from other books and records of the other businesses of trustee. Each account shall have a record separate from all other accounts and shall be adequately identified. SECTION 1412. Fees and Commissions . A trustee shall be entitled to reasonable fees and commissions which shall be determined on the basis of the cost of services rendered and the responsibilities assumed, except in the case of judicial trusts where the compensation shall be that allowed or approved by the court. In no case shall such fees and commissions be determined on the basis of the excess of the income derived from the investment of the trust and other trust funds over a certain amount or percentage. No trustee shall solicit or receive rebates on commissions, fees and other payments for the services rendered to the trust account or beneficiaries of the trust account by stockholders, real estate brokers, insurance agents and similar persons or entities unless the rebates, fees and other payments shall accrue to the benefit of the trust account or the beneficiaries thereof. SECTION 1413. Required Surplus . Every trustee corporation, before the declaration of dividends, shall carry to surplus at least ten per cent (10%) of its net profits realized out of its trust operations since the last preceding dividend until the surplus shall amount to twenty per cent (20%) of its authorized capital stock and no part of such surplus shall at any time be paid out in dividends, but losses accruing in the course of its business may be charged against surplus. SECTION 1414. Establishment of Common Trust Fund . Any trust company, bank or investment house authorized to perform trust functions may establish, administer and maintain one or more common trust funds, subject to the following limitations: a. In the case of trust other than guardianships, conservatorships or court trusts, the investments in common trust funds may be made in accordance with express authority embodied in the instrument creating the trust, or upon amendment thereof with prior consent of all the beneficiaries or other party in interest. b. In the case of guardianships, conservatorships or court trusts, such investment in common trust funds may be made only upon court approval. c. No solicitation of participations/funds from the public shall be undertaken until after thirty (30) business days have elapsed from the date of receipt of the plan by the Central Bank, as required in Subsec. 1414.1 hereof. SUBSECTION 1414.1 Trust plan . Each common trust fund shall be established, administered and maintained in accordance with a written declaration of trust, referred to as the "plan" which shall be approved by the board of directors of the trustee and copy submitted to the Central Bank thirty (30) business days prior to its implementation. The plan shall make provision on the following matters: a. Manner in which the fund is to be operated; b. Investment powers of the trustee with respect to the fund, including the character and kind of investments which may be purchased by the fund; c. Allocation, apportionment, distribution dates of income, profit and losses; d. Terms and conditions governing the admission or withdrawal of investments or participations in the fund; e. Auditing and settlement of accounts of the trustee with respect to the fund; f. Basis and method of valuing assets in the fund; g. Basis upon which the fund may be terminated; h. Mechanics of expansion and contraction of units and/or participations comprising the fund; and i. Such other matters as may be necessary or proper to define clearly the rights of participants in the common trust fund. The provisions of the plan shall control all participations in the fund and the rights and benefits of all persons interested in such participations, as beneficiaries or otherwise. The plan may be amended by resolution of the board of directors of the trustee: Provided , however , That participants in the fund shall be immediately notified of such amendments and shall be allowed to withdraw their participations if they are not in conformity with the amendments made: Provided, further , That amendments to the plan shall be submitted to the Central Bank for notation within ten (10) business days from approval of the amendments by the board of directors. A copy of the plan shall be available at the principal office of the trustee during regular office hours, for inspection by any person having an interest in a trust whose funds are invested in the plan, or by his authorized representative. Upon request, a copy of the plan shall be furnished such person. SUBSECTION 1414.2 Management of common trust funds . The trustee shall have the exclusive management and control of each common trust fund administered by it, and the sole right at any time to sell, convert, reinvest, exchange, transfer or otherwise change or dispose of the accounts comprising the fund. The trustee may charge a fee for the management of any common trust fund administered by it: Provided , That the fee corresponding to each participant shall be limited to his pro rata share in the participations in the fund. The trustee may reimburse itself out of the common trust fund for such reasonable expense incurred by it in the administration of such fund. The trustee shall designate clearly upon its records the trust accounts owning participation in the common trust fund and the extent of the interest of such accounts. The trustee shall not, without the prior written consent of the trustor or beneficiary, negotiate nor assign the trustor's beneficial interest in the common trust fund. No trust account holding a participation in a common trust fund shall have or be deemed to have any ownership or interest in any particular account or investment in the common trust fund but shall have only its proportionate beneficial interest in the fund as a whole. SUBSECTION 1414.3 Trustee as participant in common trust fund . A trustee administering a common trust fund shall not have any interest in such fund other than in its capacity as trustee nor make any loans on the security of a participation in such fund: Provided, however , That a trustee which simultaneously administers funds for its employees may invest such funds in the common trust fund. The trustee may acquire an interest in a participation in the common trust fund in the case of a foreclosure or to prevent a loss: Provided , That such participation shall be withdrawn on the first instance that such withdrawal can be effected. SUBSECTION 1414.4 Exposure limit to single person/entity . No investment for a common fund shall be made in stocks, bonds or other obligations of any one person, firm or corporation, if as a result of such investment the total amount invested in stocks, bonds or other obligations issued or guaranteed by such person, firm or corporation would aggregate in excess of fifteen per cent (15%) of the market value of the fund: Provided , That this limitation shall not apply to investments in securities issued by the Republic of the Philippines or by the Central Bank or securities fully guaranteed by the Republic of the Philippines. SECTION 1415. Miscellaneous Provisions . The following rules and regulations shall also be observed by trust companies, banks, and investment houses relative to their trust operations. SUBSECTION 1415.1 Reports to trustor . Every trustee shall render reports on the trust accounts to the trustor, beneficiary or other party in interest or the court concerned or any party duly designated by court order, as the case may be. The report shall be in such form and frequency as required under the agreement: Provided , That it contains sufficient information to apprise the party concerned of the significant developments in the administration of the account during the period covered. SUBSECTION 1415.2 Reports to Central Bank . Each trustee shall submit to the Central Bank such reports as may be prescribed by the appropriate supervising and examining department of the Central Bank. SUBSECTION 1415.3 Audits . The trust operations shall be included in the annual operations/management and financial audit required under existing Central Bank regulations. LexLib SUBSECTION 1415.4 NFA and ACA funds . Funds of the Rice and Corn Administration (now National Food Authority) and the Agricultural Credit Administration (ACA) which are placed with commercial banks as well as rural banks exclusively for the purpose of financing the rice program of the Government are trust accounts and are of a fiduciary nature, considering that such funds are to be employed immediately and under direct instructions from the NFA and the ACA. SUBSECTION 1415.5 Borrowings from trust departments or managed funds of banks and investment houses . The provisions of Sec. 1292 shall govern borrowings from trust departments or managed funds of banks and investment houses. Loans granted to foreign firms which are funded by moneys held by banks and non-bank financial intermediaries as trustee, are considered as peso borrowings within the purview of Sec. 1346. These loans should thus be posted in the Schedule of Peso Borrowings of said firms as required under the terms and conditions of their respective borrowing authority issued by the Inter-Agency Committee on Domestic Borrowings of Foreign Firms. SUBSECTION 1415.6 Trust accounts with time deposit privileges . Certain trust accounts maintained by government agencies with commercial banks with privileges of time deposits (among others, a fixed rate of return and the full return of principal without regard to losses, expenses or otherwise) shall not be considered as creating a trust relationship between the parties and the amounts involved shall be treated as ordinary deposits by government agencies; and therefore, subject to existing statutory and regulatory provisions on (a) deposit reserve requirements, and (b) ceiling on interest rates on deposits. SECTIONS 1416-1420. ( Reserved ) B. FUND MANAGEMENT SECTION 1421. Scope of Regulations . The following regulations govern management of funds by banks and non-bank financial intermediaries performing quasi-banking functions. SUBSECTION 1421.1 Definition . For purposes of these regulations, ''financial manager" shall refer to a bank, or a non-bank financial intermediary performing quasi-banking functions engaged in the business of administration and management of property, or money or its equivalent as agent or representative of the owner or of a third person. SECTION 1422. Responsibilities of Administration . The board of directors shall be responsible for the proper exercise of the fund management powers vested in the financial manager. It shall determine and formulate policies with regard to the proper management of each account, which include investment, reinvestment and disposition of the fund or property under management, and the review of the actions of all officers, employees and committees designated to manage the funds or accounts, especially in the absence of specific agreement on investments, or in the case of discretionary accounts. No account shall be accepted without the prior approval of the board of directors or its duly designated committee or officer. Upon acceptance of an account, a prompt review of all the assets placed under management shall be made. Thereafter, a review shall be made at least once every twelve (12) months to determine the advisability of retaining or disposing of such assets. The funds shall be administered with the skill, care, prudence and diligence necessary under the circumstances then prevailing that a prudent man, acting in like capacity and familiar with such matters, would exercise in the conduct of an enterprise of like character and with similar aims. The duties and functions of the officers and employees involved in the fund management operations shall be clearly defined and distinguished from other operations/functions of the financial manager. SECTION 1423. Minimum Features of Management Contract . To distinguish fund gathering activities pursuant to fund or portfolio management contracts from borrowings through deposit substitutes, loans or trust agreements, the contract shall have the following minimum features: a. There shall be no stipulation whereby legal title to the money or property for management is transferred to the financial manager while beneficial title is retained by the client or reserved for a third party beneficiary. b. The contract shall be clear that the financial manager acts only in a representative capacity and therefore his acts are designated to be those of his client. c. The contract shall not stipulate fixed interest. d. Any arrangement based on "income expectation" or like terms, shall be clarified by including a clause that said "income expectation" or like terms is not a guaranty of return or income, nor does it entitle the client to a fixed interest or return on the money invested; and e. There shall be a stipulation that in case of withdrawals and/or termination of contract, agreement, etc., before the agreed period, the client shall be entitled to such income as the money invested may have earned, less commission, if any. SECTION 1424. Authorized Investment ; Prohibition . Investments shall be made in accordance with the terms of the agreement, either in the name of the owner of the fund or in the name of the financial manager in his capacity as agent specifically indicated in the covering documents. When the agreement does not specify the character or class of investments, the investments shall be limited to debt and equity securities contained in the list approved by the board of directors or its duly designated committee. Said list shall be evaluated and approved by the board of directors at least once every twelve (12) months: Provided, however , That in case the list was approved by the committee, a copy thereof shall be submitted to the board for ratification in its next regular or special meeting. Except as may be provided in the agreement, at least seventy-five per cent (75%) of the funds shall be placed in diverse securities taking into account (a) the purposes of the-fund management; (b) the amount of the fund; (c) financial and industrial conditions; (d) type of security; (e) distribution as to industries; and (f) dates of maturity. Funds for investment in securities shall be invested in high-grade securities acceptable as collateral under Central Bank rules. Investments in other securities shall be made with the consent or instruction of the fund owner. Funds shall not be invested in securities being underwritten by the financial manager or in securities of, or property acquired from the financial manager which may affect or influence the judgment of the financial manager in making the investment or in acquiring the property, unless the relationship is disclosed in writing to the owner(s) of the funds and the written consent of the latter is secured prior to the transaction: Provided, however , That investments in securities issued by the Republic of the Philippines or of the Central Bank or other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines underwritten by the financial manager shall not be covered by the aforementioned prohibition: Provided, further , That investments in direct or indirect credit accommodations to directors, officers and stockholders shall not exceed the ceilings provided under existing Central Bank regulations, and: Provided, finally , That all loans from managed funds shall be subject to the single borrower limit prescribed for banks and non-bank financial intermediaries performing quasi-banking functions as the case may be, under existing regulations. cdpr For purposes of these regulations, funds shall be considered invested in securities of, or property acquired from, the financial manager when the transaction is with: a. Any of the departments, branches or units, directors, officers, stockholders or employees of the financial manager; b. The spouse or relative within the first degree of consanguinity or affinity of such director, officer or employee; c. A partnership (or a partner for the account of the partnership) of which such director, officer or employee (or his spouse or relative within the first degree of consanguinity or affinity) is a general partner; d. A co-owner with such director, officer employee (or his spouse or relative within the first degree of consanguinity or affinity) of the property, except when the transaction refers only to said co-owner's undivided interest; e. A corporation, association or firm of which any or a group of such directors, officers, employees and/or their spouses or relatives within the first degree of consanguinity or affinity hold or own more than fifteen per cent (15%) of the subscribed capital stock of said corporation or of the equity of such association or firm; or f. A corporation, association or firm of which any director, or officer of the financial manager is also an officer or director of said corporation, except in the case of a single director/officer interlock for the sole purpose of protecting the credit exposure of the financial manager, or by reason of the director's/officer's expertise and professional management capabilities in the highly specialized or technical field of operations of the corporation, association or firm. SUBSECTION 1424.1 Commingling of Funds . No financial manager shall commingle the funds of two or more accounts for the purpose of investing in the money market. However, managed funds may be commingled for the purpose of complying with the prescribed minimum denomination or principal amount of a duly registered commercial paper; Provided , That the owners of the funds have specifically agreed in writing to such commingling. ( Effective April 28, 1985 ). SECTION 1425. Separation of Accounts ; Reports . All monies, properties or securities received by a financial manager shall be kept separate and distinct from the funds, properties and other assets used in the conduct of its general business. The fund management operation shall have books and records separate and independent from other books and records of the financial manager and shall follow the Manual of Accounts for Fund Managers prescribed by the Central Bank. Each account shall have a record separate from all other accounts, and the investments of each account except in case of authorized commingled investments, shall be kept physically separated and be adequately identified from the investments of other accounts. Every financial manager shall render reports on the managed funds to the owner of the fund, beneficiary or any party duly designated as the case may be. The report shall be in such forms and frequency as required under the fund management agreement: Provided , That it contains sufficient information to apprise the party concerned of the significant developments in the administration of the account during the period covered. In addition, each financial manager shall submit to the appropriate supervising and examining department of the Central Bank such reports as may be required. SECTION 1426. Fees and Commissions for Fund/Portfolio Management Services . A financial manager shall be entitled to reasonable fees and commissions which shall be determined on the basis of the cost of services rendered and the responsibilities assumed. In no case shall such fees and commissions be determined on the basis of the income derived from the investment of the fund/portfolio over a certain amount or percentage. No financial manager shall solicit or receive rebates on commissions, fees and other payments for the services rendered to the owners of the fund/portfolio by stockbrokers, real estate brokers, insurance agents and similar persons or entities unless the rebates, fees and other payments shall accrue to the benefit of the fund. SECTION 1427. Security for Faithful Performance of Fund Management Duties . As security for the faithful performance of fund management duties, banks and non-bank financial intermediaries performing quasi-banking functions with fund management operations shall deposit with the Central Bank cash or eligible securities on the basis of the end-of-month average of funds managed by the financial manager during the immediately preceding semester, in accordance with the following schedule: Volume of managed funds Required deposit (In million pesos) with the Central Bank P35.500 and below P250,000 35.501 but not over P71.000 500,000 71.001 but not over 106.500 750,000 106.501 but not over 142.000 1,000,000 A deposit of P250,000 shall be required for every additional P35.5 million of managed funds in excess of P142 million: Provided , That any increase in the deposit shall be made by the financial manager within sixty (60) days from the end of the immediately preceding semester. Securities which may be deposited as security shall consist of bonds issued by the Republic of the Philippines or the Central Bank or bonds the servicing and repayment of which are fully guaranteed by the Republic of the Philippines: Provided , That other kinds of securities may be declared eligible by the Monetary Board. SECTIONS 1428-1430. ( Reserved ) C. OTHER FIDUCIARY FUNCTIONS SECTIONS 1431-1498. ( Reserved ) SECTION 1499. General Provision on Sanctions . Unless otherwise indicated therein, any violation of the provisions of this Part shall be subject to the provisions of Sections 34, 34-A and 34-B of Republic Act No. 265, as amended, without prejudice to other sanctions as may be provided by law. PART SIX Miscellaneous A. OTHER OPERATIONS SECTION 1601. Purchase and Sale of Government Securities . The purchase and sale of government securities shall be subject to the provisions of Section 1389 to Subsection 1389.4. ( Effective January 28, 1983 ). SUBSECTION 1601.1 Central Bank Certificates of Indebtedness (CBCIs) . For purposes of clarification, the phrase "to be held in trust" as embodied in the last sentence of paragraph 4 of the Service Agency Agreement in the sale of Central Bank Certificates entered into by and between the Bank and duly accredited service agencies which reads: "4. . . . The agency in this connection is allowed to retain twenty per cent (20%) of the proceeds of its sale of CBCI to be held in trust for servicing interest and other requirements of the CBCI." should be construed to mean that the fund so retained pursuant to the aforementioned Service Agency Agreement shall be held for the Central Bank under a special account. Such special account shall not be considered a deposit and therefore, not subject to reserve requirement. Accordingly, such special account should be included among "Other Liabilities" in financial statements submitted to the Department of Commercial and Savings Banks. SUBSECTION 1601.2 DBP Bonds . Commercial banks and their branches, as well as rural and private development banks, which are duly accredited by the Development Bank of the Philippines (DBP) as sales and service agencies for its bond marketing operations, are authorized to open and maintain special DBP accounts arising out of the proceeds of DBP bonds sold by said service agencies. The grant to service agency banks of DBP of the authority to accept DBP savings or time deposits is an exception to the provisions of Sec. 1239: Provided, however , That: a. Such deposits shall be limited to the proceeds from sales of DBP Progress Bonds; and b. Such deposits shall be subject to the reserve requirements on savings and time deposits. Such DBP savings and time deposits shall be exempt from the liquidity floor requirement on government deposits. SUBSECTION 1601.3 Treasury Bills (Tax Anticipation Series) . Guidelines in the consideration of banks to be designated as government depository banks which may be allowed to handle the tax and loan accounts to be established by the National Government in connection with the issuance and sale of Treasury Bills (Tax Anticipation Series) follow: a. Only commercial banks meeting the following criteria may be authorized to handle tax and loan accounts: 1) That such banks are incorporated under the laws of the Philippines; 2) That such banks have realized net profits during the preceding three years; and 3) That such banks are not under supervisory action of the Monetary Board, such as suspension of loan operation, etc. b. Except as otherwise provided, tax and loan accounts which shall be established in designated commercial banks shall be treated as demand deposits, subject to: 1) Legal reserve required under existing regulations; 2) Liquidity floor of thirty per cent (30%) in the form of Treasury Bills, Central Bank supported securities and/or credits eligible for rediscount with or advances from the Central Bank under Section 87 of Republic Act No. 265, as amended; 3) Ceiling the amount of which shall not exceed fifty per cent (50%) of net worth; and 4) Reporting requirements on government deposits. c. Proceeds derived from the sale of Treasury Bills (Tax Anticipation Series) deposited under the said tax and loan accounts with the commercial banks shall be subject to withdrawal upon call made by the Central Bank as fiscal agent of the Government, which call shall be made in writing. SUBSECTION 1601.4 Premyo Savings Bonds . In implementation of Ministry Order No. 4-79, Series of 1979, providing for the payment of prizes of winning Premyo Savings Bonds "Biglang-Bahay" Series, in the form of cash at the option of the Human Settlements Development Corporation if the holder thereof is a service agency, the following procedure shall be observed: a. The service agency shall prepare the usual prize claim for Premyo Savings Bond. b. The prize claim shall be forwarded to the HSDC with the request that payment be made in the form of cash. c. On the basis of the above prize claim, the service agency bank shall debit the account "Due to CB-PSBs" (30% retention). d. The Securities Servicing Department shall respond to the above debit only upon receipt of the prize claim, payment of which, in the form of cash, has been approved by the HSDC. The 30% sales retention privilege for servicing winning Premyo Savings Bonds shall be allowed provided that the purchased bonds are consigned to branches within 90 days from the date of purchase and not held as legal reserves. In the event that the bonds are not consigned within 90 days from date of purchase, or that a portion or all of these bonds are reverted for use as legal reserves, the authorized service agency shall remit 1/3 of the 30% retained proceeds to the Central Bank within 10 days after the 90-day period if not consigned within the reglementary period or after it has been reverted for use as legal reserve. LibLex SUBSECTION 1601.5 National Housing Authority (NOVA) Bonds . NHA bonds may be marketed through direct sale to CB-accredited dealers or through auction: Provided , That the holders shall discount the bonds exclusively with CB-accredited dealers in consultation with the Central Bank: and, Provided, further , That bonds issued through NHA's lending-through-bonds program shall be in small staggered amounts not exceeding the aggregate amount of P50 million for the first series. The basic features of the NHA bonds are as follows: Interest 8.5 per cent interest per annum, tax exempt Total issue P150 million Maturity Five Years Guarantee Fully and unconditionally guaranteed as to principal and interest by the Republic of the Philippines Other features a. May be callable in whole or in part by NHA before maturity; b. May be utilized in fulfillment of the bonding requirements in contracts with NHA; c. Considered as authorized investments of insurance companies; and d. May be utilized to settle obligations with NHA. Use of Proceeds For funding requirements of the housing program of NHA for 1982. SECTION 1602. Collection of Customs Duties/Taxes/Levies and other Revenues . The following regulations shall govern the collection of customs duties, taxes, levies and other revenues through the banking system. ( Effective July 2, 1985 ). SUBSECTION 1602.1 Coverage . For more effective accounting and control of revenue collection, all those presently accredited agent banks with demand deposit (DD) accounts with the Central Bank of the Philippines and specialized government banks (Development Bank of the Philippines, Land Bank of the Philippines and Philippine Amanah Bank) and their branches/extension offices/agencies are authorized to collect (a) customs duties, taxes and other levies, (b) import processing fees, and (c) export/premium duties: Provided, however , That the collection of taxes from government-owned and controlled corporations shall be made only through banking offices of the Philippine National Bank and other government banks, including the Development Bank of the Philippines. ( Effective July 2, 1985 ). SUBSECTION 1602.2 Collection and reporting of internal revenue taxes . The participating banks which are duly accredited by the Bureau of Internal Revenue to accept payment of Internal Revenue taxes shall be governed by BIR Revenue Regulations No. 5-84 dated May 29, 1984, as amended by Revenue Regulations No. 1-85 dated January 28, 1985, contained in Appendix 41 of this Book. ( Effective July 2, 1985 ). SUBSECTION 1602.3 Collection and reporting of customs duties and import processing fees . The participating banks are authorized to accept payment of customs duties, taxes and other levies, and import processing fees under the following procedures: a. The collecting bank shall acknowledge receipt of payments of customs duties, taxes and other levies, and import processing fees by issuing Official Receipts (ORs) in forms to be requisitioned by the Head Office from the General Services Division, Bureau of Customs, Manila. b. The collecting bank shall book all such collections and credit same to the special account 'Due to Central Bank Bureau of Customs'. c. The branch shall report by telephone, telex or other means to its Head Office, at the end of each day, total collections for the day and the inclusive serial numbers of ORs issued, to be used as basis for the preparation by their respective Head Offices of the Consolidated Report of Daily Collections of Customs Duties, Taxes and Other Levies (RC 82-005). d. The Head Office and its branches shall accomplish the Abstract of Daily Collections of Customs Duties, Taxes and Other Levies (RC 82-006) and submit the same, duly supported with copies of Orders of Payment (OPs), Official Receipts (ORs), Release Certificates (RCs) and commercial invoices on the same day to the offices indicated in the form. e. The Head Office of the participating banks shall consolidate all Reports of Collections with those of its branches and submit the original of the Consolidated Report on Daily Collections of Customs Duties, Taxes and Other Levies (RC 82-005) to the Accounting Department, Central Bank of the Philippines, Manila, on the 10th calendar day following the date of collection. Simultaneously, the remaining copies shall be distributed to the offices indicated in the form. ( Effective August 13, 1982 ) SUBSECTION 1602.4 ( Deleted by Circular No . 884 ) SUBSECTION 1602.5 Collection and reporting of export/premium duties . The participating banks are authorized to accept payment of export/premium duties under the following procedures: a. The collecting bank shall deduct from the export proceeds the estimated amount of export/premium duties due from the export shipment upon negotiation of the shipping documents but shall collect the exact and correct amount of such duties upon presentation of the Order of Payment (OP) issued by the Export Coordinating Division, Bureau of Customs (For Port of Manila) or the Collector of Customs concerned. b. The collecting bank shall issue the corresponding ORs in forms to be requisitioned by the head office Tom the General Services Division, Bureau of Customs, Manila. c. The collecting bank shall book all such collections and credit same to the special account "Due to Central Bank Export/Premium Duty". d. The branch/extension office/agency shall: (1) report by telephone, telex or other means to its head office, at the end of each day, total collections for the day and the inclusive serial numbers of ORs issued, to be used as basis for the preparation by the respective head offices of the Consolidated Report on Daily Collections of Export/Premium Duty (RC 82-007); and (2) accomplish the Abstract of Daily Collections of Export/Premium Duty (RC 82-008) and submit the same, duly supported with copies of OPs and ORs, within ten (10) calendar days from date of collection to the offices indicated in the form. e. The head office of the collecting bank shall: (1) consolidate its report of collection with those of its branches/extension offices/agencies and submit to the Bureau of Customs Unit, CB Complex, the Consolidated Report of Daily Collections of Export/Premium Duty (RC 82-009) on the day following the date of collection; and aisadc (2) consolidate the Abstract of Daily Collections of Export/Premium Duty (RC 82-010) with those received from branches/extension offices/agencies. The original of the Consolidated Abstract of Collections of Export/Premium Duty (RC 82-011) shall be submitted to the Accounting Department, Central Bank of the Philippines, Manila, on the 10th calendar day following the date of collection. Simultaneously, the remaining copies, with the supporting OPs and ORs, shall be submitted to the Bureau of Customs Unit, CB Complex, Manila. SUBSECTION 1602.6 Remittances thru debit/credit advises . The Accounting Department, Central Bank of the Philippines, Manila, shall debit the demand deposit (DD) accounts of the banks concerned for the total daily collection, which is due for remittance on the 10th calendar day from the date of collection (based on either forms RC 82-005, RC 82-007 or RC 82-011). Said Department shall also credit on the same day the account of the Treasurer of the Philippines for all such remittances of tax collections, duties, fees and other levies. "Copies of debit/credit advices to authorized agent banks (AABs) shall be furnished by the BIR Unit, CB Complex, Manila. ( Effective July 2, 1985 ). SUBSECTION 1602.7 Reconciliation of revenue collections . The Bureau of Customs shall report to the Supervision and Examination Sector, Central Bank of the Philippines, Manila, any unreported collection or other discrepancies discovered for proper examination. The Central Bank shall take appropriate action, through the Accounting Department, either by debiting or crediting the demand deposit account of the bank concerned, upon advice by the Supervision and Examination Sector on the results of the investigation. ( Effective July 2, 1985 ). SUBSECTION 1602.8 Penalty for willful delay on the reporting of collections/remittances . In the event the Bureau of Customs shall discover, in the course of its verification, any willful delay in the reporting of collections and remittances by banks, said Bureau shall advise the Accounting Department of the Central Bank to debit the demand deposit account of the bank concerned with the corresponding penalty therefor, in accordance with Subsec. 1602.10. ( Effective July 2, 1985 ). SUBSECTION 1602.9 Policy formulating body . The Ministry of Finance, in consultation with other government agencies/offices, may issue further guidelines/rules and regulations on revenue collections as may be deemed necessary, and the same, except those pertaining to the collection of internal revenue taxes, shall be subject to approval of the Monetary Board. ( Effective July 2, 1985 ). SUBSECTION 1602.10 Fines for delayed reports/remittances of collections . Any banking institution authorized to collect customs duties, taxes and other levies and export-premium duty, which shall willfully delay the submission of reports and remittance of its collection to the Central Bank within the period prescribed thereon, shall pay fines in accordance with the following schedule: For delay in For delay in submission of remittance of report collection a. Per banking day of P10 plus 1/30 of 1% on default for the first the amount of 5 banking days of delayed remittance default b. Per banking day of P15 plus 1/15 of 1% default for the next on the amount 5 banking days of of delayed default remittance c. Per banking day P20 plus 1/10 of 1% of default for on the amount the succeeding of delayed banking days of remittance default Provided , That: (1) Fines imposed above shall not be in excess of P500 a day; (2) The default shall start to run on the day following the last day required for submission of the report or remittance, as the case may be. However, should the last day of filing fall on a non-banking day in the locality where the reporting bank is situated, the default shall start on the day following the next banking day; and (3) The manner of payment or collection of fines enumerated under Subsec. 1610 shall apply. ( Effective July 2, 1985 ). SUBSECTION 1602.11 Interest on revenue collections . There shall be imposed a 3% interest per annum on total collections of customs duties, export/premium duties and import processing fees by each authorized agent bank (AAB) in excess of forty million pesos (P40 M) a month, said interest to be computed monthly by the Accounting Department, Central Bank, on the basis of reports of all revenue collections submitted thirty (30) days after the end of each month, by the Bureau of Customs. ( Effective July 2, 1985 ). As soon as the monthly reports of all revenue collections are consolidated and the corresponding interest thereon computed, the Accounting Department, Central Bank, shall forward to the AABs concerned a statement of interest; to be paid. Agent banks may, within a period of thirty (30) days from date the Statement of Interest is acknowledged, advise the Accounting Department, Central Bank, of any discrepancy noted thereon. Otherwise, upon the lapse of said period, the Accounting Department shall debit their demand deposit accounts for whatever interest may be due on all collections in excess of the prescribed ceiling. SUBSECTION 1602.12 Collection of import duties at time of opening of letters of credit . The following rules and regulations shall govern the collection of import duties at the time of opening of letters of credit covering imports and for other purposes: a. Collection of deposits of import duties . All financial institutions shall, upon opening of the letters of credit covering imports, collect from the applicant/importer a deposit equivalent to the full amount of import duties due on the importation covered by such letters of credit. The deposit shall not be withdrawable and shall be utilized only by crediting the same to the import duties, taxes and other charges due on the importation. b. Amount of import duties . The import duties due shall be determined and declared by the applicant for the letter of credit subject to the penalties prescribed under Section 2503 of the Tariff and Customs Code of 1978, as amended. c. Other payment arrangements . The requirement of a deposit as stated in Section hereof shall likewise apply even if the importation is effected under other types of payment arrangements or on a deferred payment basis. The deposit should be made upon presentation of the import documents to the agent bank. d. Validation of official receipts . Such deposits shall be validated by official receipts of the financial institutions concerned and shall be credited in the final computation of the import duties, taxes and other charges due on the importation, upon the filling of the corresponding import entry. LLphil e. Collection of deficiency and refund of excess deposits . Any deficiency in the deposit made as against the actual import duties, taxes and other charges due on the importation shall be collected by the Bureau of Customs from the importer prior to the release or withdrawal of the shipment. Any excess deposit shall be refunded by the Bureau of Customs to the importer. f. Remittance of collections . The Central Bank demand deposit account of the financial institutions concerned shall be debited for the deposit collected hereunder, in accordance with Subsections 1602.6 and 2602.6 of the Manual of Regulations for Banks and Other Financial Intermediaries. g. Transitory provision . The deposit required herein or letters of credit opened and or OA/DA and similar transactions whose import documents were presented during the period January 2 to 6, 1983 shall be collected by the agent bank immediately. h. Violation . Violations of the provisions of this Circular shall be penalized under the pertinent provisions of the Tariff and Customs Code of 1978, as amended, and/or under Section 34-A of the Charter of the Central Bank of the Philippines. ( Effective January 6, 1983 ). * Treasury Bills for return may be sent through clearing following the procedure stated under Item d (3) of this subsection. d. Clearing procedures 1) Procedure for regular clearing . Each bank/branch, institution or entity, through its representative/s, shall deliver their respective demands in sealed envelopes made out separately against the other banks/branches, institutions or entities allowed to clear: Provided , that Negotiable Orders of Withdrawal (NOW) shall be contained in an envelope exclusively for that purpose: Provided, further , That the Central Bank may, at its discretion, verify the contents of sealed envelopes. The total of each demand shall be listed in a certified adding machine tape attached to the sealed envelope. In acknowledgment of receipt of the demands against the bank/branch, institution or entity he represents, the settling clerk concerned shall prepare and sign a Clearing Office Statement (Clearing Form No. 4) in duplicate for local clearing. The original and duplicate of the statement shall be submitted to the Chief, Clearing Office, in Manila or the Regional Clearing Officer in the regional clearing centers. The original shall be retained and shall be the basis for settlement of clearing balances in the respective deposit accounts with the Central Bank. The duplicate, duly authenticated by the Chief, Clearing Office or the Regional Clearing Officer concerned, shall be returned to the bank/branch, institution or entity concerned through their clearing representatives. The duplicate shall be the basis of each bank/branch, institution or entity for taking up corresponding entries in their respective books of accounts on the date of clearing. For out-of-town clearing, the Clearing Office Statement (Clearing Form No. 4-A) shall be prepared in quadruplicate for authentication by the Clearing Officer who retains one copy. The third copy shall be returned to the sending bank/branch, institution or entity through their respective clearing representatives. The original and duplicate shall be shipped to or retained in the Manila Clearing Office, as the case may be. Out-of-town demands presented in a clearing center against a bank without any branch in that particular clearing area shall be delivered to the Clearing Officer who shall prepare a debit advice (Clearing Form No. 4-B) for the head office of the drawee bank/branch concerned in the Manila clearing area. In acknowledgment of receipt of out-of-town demands, the duplicate of the Clearing Office Statement and/or the original of the debit advice/s, settling clerks of respective drawee banks/branches in each clearing center shall sign the shipping manifest. These clearing office statements and/or the debit advice/s shall serve as bases for the head offices in the Manila clearing area to record the results of out-of-town exchanges in their books on the date of receipt. Clearing operations between regional clearing centers and the Manila clearing center is shown in Appendix 32 (Tarlac, Tarlac used as Sample). 2) Procedure for special clearing . Demands may be presented directly to the drawee banks/branches, institutions or entities concerned at times other than that specified in Item a of this subsection. For this purpose, the Special Clearing Receipt (Cash Form No. 10) shall be used. The original and duplicate copies of the receipt shall be retained by the sending bank/branch, institution or entity and the triplicate shall be delivered to the drawee bank/branch. At the following clearing session, the original of the Special Clearing Receipt shall be presented as a demand against the bank/branch, institution or entity concerned. Nothing in this section shall prevent direct settlement between the parties concerned. 3) Procedure for returned items . Items which should be returned for any reason whatsoever shall be presented not later than the next regular clearing for local exchanges. Out-of-town exchanges shall be returned within the period specified under the appropriate Central Bank issuance announcing the opening of clearing facilities in each of the authorized regional clearing centers. Items for return shall be sealed in special red envelopes and shall be considered and accounted for as debits to the demanding banks/branches, institutions or entities and credits to the returning banks/branches, institutions or entities. Nothing in this subsection shall prevent direct settlement of returned items between the parties concerned. Items which have been the subject of a material alteration or items bearing a forged endorsement when such endorsement is necessary for negotiation shall be returned within twenty-four (24) hours after discovery of the alteration or the forgery but in no event beyond the period fixed or provided by law for filing of a legal action by the returning bank/branch, institution or entity against the bank/branch, institution or entity sending the same. Missorts or items misdirected through clearing shall be returned at the next clearing session in special yellow envelopes and shall be accounted for as debits to the bank/branch, institution or entity which had misdirected the items. 4) Procedure for excluded member(s) . In case any bank/branch, institution or entity is excluded from clearing on any day on account of tardiness or absence, value shall be given to deliveries of the others present for credit to their accounts in accordance with normal settling procedures. The total of said deliveries shall be debited to the account of the excluded bank/branch, institution or entity. The bank/branch, institution or entity excluded from clearing shall, as heretofore, send its representative to the Clearing Office/Unit to prepare the clearing statement and accept deliveries on it. In case of failure to send its representative, the Clearing Office/Unit shall, in the meantime, receive such deliveries which should be picked up by the excluded bank/branch, institution or entity not later than 5:30 P.M. on the same day. In the event of strike or force majeure which prevents a bank/branch, institution or entity allowed to clear from having access to its records or otherwise ascertaining whether checks delivered to it shall be honored or returned, notice of such circumstances shall immediately be given to the Central Bank Clearing Office/Unit. In such cases, items drawn against the bank/branch, institution or entity concerned shall not be presented for clearing. dctai e. Loss of clearing items . Any loss or damage arising from theft, pilferage, or other causes affecting items in transit shall be for the account of the sending bank/branch, institution or entity concerned. SUBSECTION 1603.2 Inter-regional clearing operations in Visayas and Mindanao . Inter-regional operations shall be conducted in Visayas and Mindanao through the facilities of seven (7) Central Bank Regional Clearing Units located in Bacolod, Cagayan de Oro, Cebu, Davao, Iloilo, Tacloban and Zamboanga Cities. Checks received by banks/branches in one clearing area against banks/branches located in the other clearing areas may be presented for clearing subject to the rules and regulations embodied in Subsec. 1603.1. a. Items for clearing . Items for clearing shall consist of demand items consisting of checks and/or other documents drawn against banks/branches located in each of the following clearing areas: Other Cities Within the Clearing Centers Clearing Areas Bacolod City None Cagayan de Oro City None Cebu City Mandaue Davao City None Iloilo City None Tacloban City None Zamboanga City None b. Settlement of clearing balances . Clearing balances of participating banks/branches be debited or credited, as the case may be, to the clearing accounts of their respective head offices in Manila in the afternoon of the same day the demands are presented for clearing. c. Miscellaneous provisions . Checks for inter-regional clearing shall be sealed in special brown envelopes measuring 7" x 11" with the destination "To Cebu" or "To Zamboanga", etc. as the case may be, properly stamped in bold letters of not less than one (1) inch. The left side of the envelope shall bear one inch stripe according to the following color scheme: Regional Clearing Unit Color Bacolod Green Cagayan de Oro White Cebu Blue Davao Red Iloilo Violet Tacloban Royal Blue Zamboanga Gray All participating banks shall keep photo copies/microfilms of checks presented for clearing. Any loss or damage arising from theft, pilferage, or other causes affecting items in transit shall be for the account of the sending bank/branch, institution or entity concerned. d. Guidelines for inter-regional clearing (1) For an orderly process of exchanges each bank/branch representative shall deposit the demand envelopes against drawee banks/branches located in other regional clearing areas in the respective compartments assigned to each of the participating banks/branches. (2) The bank/branch representatives shall sort the demand envelopes received according to destination. Amount of demands shall be posted as Debits (Items Received) in their respective Clearing Statements (Clearing Form 4-A) to be prepared in four (4) copies for distribution as follows: Original Sending Clearing Unit Duplicate Sending Bank/Branch Triplicate Head Office of Drawee Bank/Branch Quadruplicate Drawee Bank/Branch (3) The Regional Clearing Officer shall sort according to bank/branch and destination the demand envelopes delivered for account of banks without branches in his clearing area. Corresponding Debit Statement (Clearing Form 4-B) shall be prepared in three (3) copies for distribution as follows: Original Head Office of Drawee Bank/Branch Duplicate Drawee Bank/Branch Triplicate Sending CB Clearing Unit (4) The quadruplicate of the Clearing Statements and duplicate of the Debit Statements shall be attached to the demand envelopes for shipment to the Regional Clearing Units concerned. In acknowledgment of receipt of inter-regional demands, clearing representatives of respective banks/branches at destination shall sign the covering manifest (in duplicate). Original shall be returned to the sending clearing unit. 5) In the Regional Clearing Unit where the demands are presented, a Clearing Advice (Form 4-B (a)) shall be prepared for inter-regional as well as local and out-of-town (Manila) clearing results reflected in clearing statements and debit statements. After the 9:00 A.M. clearing session, the results of the inter-regional clearing transactions shall be posted in the Clearing Advice, striking a sub-total to determine that it is in balance. In the same Clearing Advice, the result of local and on Manila clearing shall be posted after the 4:00 P.M. session to complete the transactions for the day. The original of the clearing advice shall be sent to the Head Office of the Drawee Bank/Branch, thru the Clearing Operations Division, Manila, bound together with: (a) The duplicate of the local and out-of town (Manila) clearing statements; (b) Triplicate of inter-regional clearing statements; (c) The originals of the debit statements; and (d) The demand envelopes containing "on Manila" checks/returns. The Clearing Advice shall be the basis for entries in the books of accounts of the bank Head Offices concerned. The duplicate of the Clearing Advice shall be forwarded to the Drawee Bank/Branch while the third copy shall be retained as office file of the Regional Clearing Unit. (6) The daily results of both local, out-of-town (Manila) and inter-regional clearing shall be summarized in the consolidated clearing proof sheet. For purposes of transmission to the Head Office through the DEX machine, the results of clearing as reflected in the consolidated proof sheet shall be condensed in Clearing Form 4-C(a). Any exception or observation which requires immediate attention shall be explained in the memorandum portion. (7) All Regional Clearing Officers shall acknowledge receipt of all incoming pouches and/or shall give notice of delay/non-arrival of pouch/es or other exception/s to the sending clearing unit concerned on the Confirmation Slip not later than the following business day. If for any reason, clearing is suspended or there is no demand against any of the other clearing units and as no pouch will be sent to all or any of the clearing units, the Confirmation Slip, which shall be placed in an envelope properly addressed to the clearing unit concerned and duly marked in bold letters "CONFIRMATION SLIP FOR IMMEDIATE TRANSMITTAL TO ADDRESSEE", shall be sent through the pouch to Manila. A duplicate of the Confirmation Slip for the file of the Clearing Operations Division, Manila Office shall be stapled to the envelope. LLpr (8) All shipments of pouches shall be accompanied by a checklist and manifest which shall be properly acknowledged by the receiving clearing unit. A separate transmittal letter shall be prepared in duplicate for all communications addressed to other departments which are sent through the general-purpose pouch under the responsibility of the Administrative Department, Manila. The original shall be properly marked "For the Communications Center" while the duplicate shall be returned to the sending Regional Clearing Unit with the acknowledgment of the personnel in-charge of opening the pouch in the Communications Center. (9) All clearing pouches arriving late in the afternoon and in the evening may be picked up from the airport in the morning of the following day for delivery to the drawee bank at the 9:00 A.M. clearing session. For security reasons, those arriving on Friday night shall be picked up on Saturday morning. SUBSECTION 1603.3 Treasury warrants . The National Treasury issued the following regulations on the Type "A" and Type "B" Treasury Warrants in Manila and in areas served by the Central Bank Regional Clearing Offices: a. Effectivity . Type "A" and "B" treasury warrants shall be accepted as clearing items for regional clearing in areas served by the Central Bank regional clearing offices. The branches or agencies of the commercial banks may avail of this facility of the Central Bank by following the procedures prescribed hereunder. These treasury warrants shall be carried in the Central Bank pouches from their regional offices to Manila. b. Treatment of Types "A" and "B" treasury warrants : Types "A" and "B" treasury warrants with circular holes already punched at the designated field by the bank branches or agencies in accordance with Treasury Circular dated July 7, 1969 shall be placed in separate sealed envelopes or packages, together with their respective run-up tapes. The outside of the envelopes must clearly indicate the type of treasury warrants contained therein, the number of pieces, and the total amount per tape. When the pouch is received in Manila, these envelopes or packages shall be turned over by the Central Bank unopened to the representative of the sending bank's Manila office. The Manila office of a bank shall gather all treasury warrants it receives from its various branches and agencies in a single day, and submit them to the National Treasury for special clearing on the next day. The treasury warrants must be endorsed by the Manila office, stating, among others, the date of clearing and that they are being presented for special clearing. These treasury warrants, as well as those paid at the main offices and suburban branches or agencies of the commercial banks shall be presented to the National Treasury by the banks concerned between the hours of 8:00 A.M. and 10:00 A.M. during banking days, supported by run-up tapes and the usual clearing receipt. The special clearing receipt may be cleared on the same day through the Central Bank Clearing House and shall be accounted as debit against the demand of the National Treasurer. c. Period within which treasury warrants may be dishonored . The National Treasury may dishonor a Type "B" treasury warrant found defective within two (2) working days, while Type "A" treasury warrants may be dishonored within sixty (60) working days. In both cases, the period shall be reckoned from the date the special clearing receipt is coursed through the Central Bank Clearing House. The foregoing time limit will not apply to treasury warrants found to have been paid to the wrong party, tampered, and otherwise tainted with fraud. d. Dishonored, miscleared, and other returnable items . These items will be returned directly to the presenting bank. The accepting bank shall issue the corresponding credit ticket in favor of the National Treasury, which ticket shall be cleared by the National Treasury through the Central Bank Clearing House. If the bank to whom a treasury warrant is dishonored refuses to accept or recognize the action taken by the Treasury for a valid reason, the bank may return the controversial items, or evidences thereof, directly to the National Treasury, together with required run-up tapes and a concise but comprehensive statement of such reason. The return must be made not later than 10:00 A.M. on the next banking day, otherwise the member bank shall be deemed to have accepted and recognized the validity of the returned item, and it is, therefore, left without further recourse. The National Treasury shall issue the corresponding credit ticket for those returned items accepted, and same shall be taken up in the manner set forth above. e. Compliance . Banks participating in the Treasury special clearing operations bind themselves to conform, without reservation, to the regulations promulgated herein, or which may henceforth be promulgated relative to special clearing operations. Any bank has the option to present their paid treasury warrants to the National Treasury for collection. f. Central Bank responsibility . Any treasury warrant lost or pilfered from the Central Bank pouch shall still be the responsibility of the sending bank, and such responsibility ends only after the National Treasury has taken physical possession of the treasury warrants. Lost or pilfered treasury warrants must be reported to the National Treasury in accordance with Treasury Memorandum Circular No. 13-69, dated October 1, 1969. SUBSECTION 1603.4 Handling of checks drawn against out-of-town accounts . The following regulations shall govern the handling of checks drawn against demand deposits carried in out-of-town banks: a. The bank which accepted for deposit/collection a check drawn against a demand deposit maintained in an out-of-town bank must send the check for collection to the drawee bank within twenty-four (24) hours (non-regular banking days excluded) counted from the time the bank accepted the check. Sending the check for collection is sending it directly to the drawee bank by registered mail with return receipt. Checks drawn against drawee banks located in places where the Central Bank maintains clearing offices shall be cleared directly with the said offices. b. Upon receipt of a check from the collecting bank, the drawee bank carrying the demand deposit against which the check is drawn (if cleared through means other than the clearing facilities of the Central Bank), must indicate the date and time of receipt of the check on the registered mail return receipt if the item is sent by registered mail, or on the duplicate copy of the collecting bank's letter of instruction if the item is sent through means other than by registered mail. c. The drawee bank should maintain a register of all checks received for settlement which should be separate and distinct from the register of incoming mails or messages. This register must indicate in chronological order all checks received for settlement with information such as, but not limited to, the date and time the check was received, the name and address of the collecting bank, the current account number against which check is drawn, the date and amount of the check, and the date the proceeds thereof were remitted or the date the check was returned, as the case may be. d. The drawee bank or office carrying the demand deposit against which the check is drawn must dispose of such item within twenty-four (24) hours (non-regular banking days of the drawee bank excluded) counted from the time it received the check. Disposing of such item is remitting the proceeds to the collecting bank if the check is honored, or returning the check with the reason for the return, in the event of dishonor. e. The date of disposition of the check shall be determined by the date of mailing of the instrument of payment, say demand draft, or date of dispatch of telegraphic transfer, if the check is honored, or by the date of mailing of the return slip attached to the item, if it is dishonored. f. All checks received for payment but not acted upon at the end of the day must be recorded by the drawee bank on the same day as part of its contingent account "Inward Bills for Collection". SECTION 1604. Miscellaneous Operations . The following operations of commercial banks shall be governed by the rules and regulations provided herein. SUBSECTION 1604.1 Collection and paying agents of the SSS . Commercial banks, as well as the Development Bank of the Philippines, are authorized to act as collecting and paying agents of the Social Security System (SSS), under which agency: a. Employer-members of the SSS may pay their premium contributions to the SSS through the said banks and the funds thus collected shall be remitted to the SSS within thirty (30) days from receipt thereof; Commercial banks are also authorized to receive amortization payments by SSS members, individuals and entities on commercial, industrial, housing, salary and educational loans granted by the SSS. b. During the 30-day period that such premium contributions are in the custody of the banks, such funds shall not earn interest; and c. The banks shall not collect from the SSS any service charge for such agency. The premium contributions collected by commercial banks shall be handled by the operating departments (cash departments) of the banks concerned and not by their trust operations. The banks concerned are authorized to accept such deposits as an exception to the provisions of Sec. 1239 and such deposits shall be exempt from the liquidity floor on government deposits: Provided, however , That such deposits: a. shall be subject to the reserve requirements on deposits; and b. shall be limited for the present to banks incorporated in the Philippines, considering the requirements of the SSS. SUBSECTION 1604.2 Collection of interest on government bonds and securities . In view of the provisions of Revenue Regulations No. 6-79 dated June 4, 1970 supplementing Revenue Regulations No. 13-78, otherwise known as the Expanded Withholding Tax Regulations on Taxable Government Bonds and Securities, all requests for collection of interest payments for the account of clients should indicate the bondholder's full name, tax account number and present address. SUBSECTION 1604.3 Depository relationship arrangement . The depository relationships of commercial banks shall be governed by the following regulations. a. As depository of rediscounting proceeds . Rediscounting proceeds for rural banks situated outside the 50-kilometer radius from Manila shall be credited for the account of the rural bank concerned, to the clearing account with the Central Bank of the depositary commercial bank to be designated by the borrowing rural bank. The contemplated depository relationship arrangement must be manifested to the Central Bank thru the submission by the rural bank of an authenticated copy of the letter of understanding between the rural bank and the commercial bank showing such depository relationship. b. As depository of funds of various special Financing program . In connection with the various Special Financing Programs for food production administered by the Department of Rural Banks and Savings and Loan Associations (DRBSLA), Central Bank, credit advices issued relative thereto by the DRBSLA Loan Teams to branches of commercial banks for the account of rural banks and stock savings and loan associations require the prior confirmation and funding of the DRBSLA. For this reason, no withdrawals from such accounts shall be allowed by the depository commercial bank until its receipt of the corresponding DRBSLA confirmation and funding. Any withdrawal permitted by the depository bank before receipt of such confirmation and funding shall be for its account, and no liability whatsoever shall attach to the Central Bank. SUBSECTION 1604.4 Operation of cash dispensers . Banks may install and operate cash dispensing machines without prior approval from the Central Bank, subject to the following conditions: a. The bank shall install the machines in its own premises and shall provide/put up adequate security measures for the bank and its deposits; b. The banks shall assure the Central Bank that this banking service shall not allow the grant of any gift, promotional offer/give-away or any additional compensation for deposits to be maintained except that which normally accrue to savings deposits; and c. The banks shall submit to the Department of Commercial and Savings Banks, for its information/records, a copy each of all brochures/pamphlets/literature dealing with this banking service. SUBSECTION 1604.5 Operation of armored cars . Banks shall use armored cars to afford security in collecting and/or delivering cash or securities and other valuables from or to their clients, branch or extension offices or the Central Bank, provided such armored cars are not operated as mobile banks, and provided, further, that banks shall secure prior Central Bank authority before they can engage in deposit pick-up services." ( Effective April 16, 1985 ). SECTION 1605. ( Reserved ) B. SUNDRY PROVISIONS SECTION 1606. Bank Premises and Other Fixed Assets . The following rules on bank premises and other fixed assets shall govern: SUBSECTION 1606.1 Expansion of bank premises Any bank contemplating to expand the premises of its existing banking offices (head office, branch, agency or extension office) shall inform the Department of Commercial and Savings Banks, in writing, of such intention, and submit: a. a sketch showing other banking offices operating in the immediate vicinity; and b. an estimated outlay involved in the expansion of premises. The bank concerned shall not start actual construction/expansion until it shall have determined that the head office/branch/extension office as expanded complies with the legal limitation on investments in bank premises. SUBSECTION 1606.2 Appreciation or increase in book value . As a general rule, appreciation or increase in book value of bank premises and other fixed assets is not allowed. However, in cases where the market value of the property has greatly increased since the original purchase, appreciation may be allowed: Provided , That the Director of the Department of Commercial and Savings Banks be notified in advance of the proposed increase in value and: Provided, further , That the corresponding appreciation credit shall not form part of the combined capital accounts of banks but lodged under a Revaluation Reserve account. SUBSECTION 1606.3 Ceiling on total investments . The following guidelines shall be observed for purposes of determining compliance by all banks with the fifty percent (50%) ceiling, based on net worth, on the total investment of banks in real estate and improvements thereof, including bank equipment, as provided in Section 25 of Republic Act No. 337, as amended: a. The investment of any bank in real estate and improvements thereof and in bank equipment shall include all real estate and equipment necessary for the bank's immediate use in the transaction of its business, such as: 1) "Bank Premises-Land and Buildings", "Buildings under Construction", "Leasehold Rights and Improvements", and "Furniture, Fixture and Equipment" (as defined in the Manual of Accounts for All Banks), owned and used by the bank in the conduct of its business, including staff houses, recreational facilities and landscaping costs, net of accumulated depreciation: Provided, however , That appraisal increment on bank premises shall not be included in the total investment in real estate and improvements for purposes of these guidelines; and 2) Real property, equipment or other chattel purchased by the bank in its name for the benefit of its officers and employees, net of depreciation and in the case of land or other non-depreciable property, net of payments already made to the bank by the officers and employees for whose benefit the property was bought, where such property has not yet been fully paid and ownership has not yet been transferred to them. b. The following shall be included in the computation of a bank's total investment in bank premises: 1) (a) The cost of real estate leased in whole or in part by the bank from a corporation in which the bank has equity, equivalent to the amount obtained by applying the percentage of the equity of the bank in the lessor to the cost of that portion of the property being leased, or (b) the amount of equity in the lessor, whichever is lower; plus the amount obtained by applying the percentage of the equity of the bank in the lessor to any outstanding loans of the lessor with the bank, the proceeds of which were used to purchase, construct or develop the real estate used for the bank's purposes. 2) The lower of (a) cost of real estate leased in whole or in part by the bank from a corporation in which any or a group of stockholders owning 10% or more of the voting stock of the bank, directors and/or officers of the bank, hold or own more than 15% of the subscribed capital stock of the lessor, equivalent to the amount obtained by applying the percentage of the equity of said stockholders/directors/officers in the lessor to the cost of that portion of the property being leased by the bank, or (b) the amount obtained by applying the percentage of the equity of the stockholders/directors/officers in the lessor to any outstanding loans of the corporation with the bank, the proceeds of which were used to purchase, construct or develop the real estate used for the bank's purposes. SECTION 1607. Bank Advertisements . The following rules and regulations shall govern bank advertisements: a. No bank shall publish, issue or distribute in any form, any advertisement that shall degrade, deprecate or otherwise prejudice other banking and financial institutions; b. No bank shall publish, issue or distribute in any form of advertisement (in newspapers, magazines, television, radio, billboards, brochures, prospectuses, or any other medium) or allow itself to be used/mentioned in any form of advertisement related to services, such as the acquisition, sale, resale or lease of real estate; insurance privileges and other non-banking activities/services, which are not directly related to the business of banking or in pursuance of regular banking business; c. No bank shall place or cause to be placed any advertisement tending to mislead a depositor into believing that he will get more in benefits than what the bank is legally authorized to give. No bank advertisement shall contain any false claim or exaggerated representation as to its liquidity, solvency, resources, deposits and banking services; d. No bank advertisement shall give the impression that the bank is engaged in a business other than banking; e. Banks shall inform their depositors and other clients by advertisements or publication of the termination of benefits previously advertised or publicized; f. Banks shall discontinue any advertisement whenever the same is deemed unethical/unwarranted or violative of the provisions of this section and are directed to do so by the appropriate supervising and examining department of the Central Bank in the exercise of its administrative authority. Towards this end, the client banks and/or their advertising agencies should incorporate in their contract/agreement for time and space with media the condition that such contract/agreement for time and space can be cancelled/terminated immediately whenever the client bank is directed by the Central Bank to desist or discontinue the particular advertisement in question; g. Responsibility for compliance with the above rules and regulations rests with the bank officers or directors who caused the approval or placement of such advertisement. SECTION 1608. Assessment Fees on Banks . The par value of CBCIs held by banks on consignment basis and which are lodged under contingent accounts shall be excluded in determining total assets for purposes of computing the assessment fees chargeable against banks under Section 28 of Republic Act No. 265, as amended. (As amended by Section 1 of BSP Circular 101 dated December 28, 1995) SECTION 1609. Reproduction and Use of Facsimiles of Government Securities, Currency Notes and Coins . The following rules and regulations shall govern the reproduction and use of facsimiles of government securities, Philippine legal tender and commemorative coins and Central Bank notes. SUBSECTION 1609.1 Facsimiles of government securities . Pursuant to Sections 98, 115 and 122 of Republic Act No. 265, as amended, the following rules and regulations shall govern the reproduction and use of facsimiles of government securities issued by and/or through the Central Bank of the Philippines: a. No person or entity shall design, engrave, print, make or execute in any other manner, or issue, distribute, circulate or use any handbill, advertisement, placard, circular, card or object whatsoever bearing the likeness or similitude of any government securities issued by and/or through the Central Bank or any part thereon whether in black and white or any color or combination of colors, without prior written authority therefor having been secured from the Governor of the Central Bank. b. The reproduction and use of facsimiles of government securities referred to in the foregoing paragraph may be authorized by the Governor of the Central Bank for printed illustrations in articles, books, journals, newspapers, or other similar materials, and for numismatic, educational, historical, newsworthy, or other purposes which do not tend in any way to defeat the objectives underlying the promulgation of these regulations: Provided, however , That any such illustration shall be in black and white, and of a size less than three-fifths (3/5) or more than one and one-half (1-1/2) times in size of the government securities being illustrated. [Please see: Appendix 33 for the procedural guidelines for the reproduction of facsimiles of government securities.] SUBSECTION 1609.2 Facsimiles of Philippine legal tender and commemorative coins . Pursuant to the provisions of Section 14 of Republic Act No. 265, otherwise known as the Central Bank Act, as amended, in relation to Section 52 of the same Act, as amended by Presidential Decree No. 72, the following regulations shall govern the reproduction and use of facsimiles of Philippine legal tender and commemorative coins: a. No person or entity shall design, engrave, make or execute in any other manner, or use, issue, or distribute any object whatsoever bearing the likeness or similitude as to design, color or, the inscription thereon of any of Philippine legal tender and commemorative coins or any part thereof, in metal form, irrespective of size and metallic composition, without prior authority from the Governor of the Central Bank. b. The reproduction and use of facsimiles of Philippine coins referred to in Item a may be authorized by the Governor of the Central Bank for printed illustrations in articles, books, journals, newspapers, or other similar materials, and for numismatic, educational, historical, newsworthy or other purposes which do not tend to defeat the objectives underlying the promulgation of these regulations. SUBSECTION 1609.3 Facsimiles of Central Bank notes Pursuant to the provisions of Section 14 of Republic Act No. 265, as amended, otherwise known as the Central Bank Act, in relation to Section 52 of the same Act, the following rules and regulations shall govern the reproduction and use of facsimiles of Central Bank notes: a. No person or entity shall design, engrave, print, make or execute in any other manner, or utter, issue, distribute, circulate or use any handbill, advertisement, placard, circular, card or any object whatsoever bearing the likeness or similitude of any currency note issued by the Central Bank of the Philippines, or any part thereof, whether in black and white or any color or combination of colors, without prior authority therefor having been secured from the Governor of the Central Bank. b. The reproduction and use of facsimiles of Central Bank notes referred to in Item a may be authorized by the Governor of the Central Bank for printed illustrations in articles, books, journals, newspapers, or other similar materials, and for numismatic, educational, historical, newsworthy or other purposes which do not tend in any way to defeat the objectives underlying the promulgation of these regulations: Provided, however , That any such illustration shall be in black and white, and of a size less than three-fifths (3/5) or more than one and one-half (1 1/2) times in size of the currency note being illustrated. SECTION 1610. Collection of Fines from Banks The following regulations shall govern the collection of fees imposed on banks for willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor: a. Banks shall, within thirty (30) calendar days from receipt of the statement of account from the Central Bank, pay the fines imposed thereon for willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor. b. For banks which maintain demand deposit account with the Central Bank, fines which are unpaid after the lapse of the thirty-day period shall be automatically debited against the corresponding demand deposit account of the bank concerned: Provided , That if the balance of the bank's account is insufficient to cover the fines due, such fines shall be paid not later than the following banking day. For the purpose of this subsection, "banking day" means a day on which the Central Bank head office and the head office of the bank are open for business. For uniform implementation of the above regulations, the procedural guidelines embodied in Appendix 34 shall be observed. SECTION 1611. Credit Information Exchange System . The following guidelines shall govern the exchange of credit information. SUBSECTION 1611.1 Participating institutions a. In general, all financial intermediaries including GSIS and SSS which are required to submit periodic reports on credit and equity exposures as prescribed under Subsec. 1161.10, and such other financial institutions which the Governor/Monetary Board may require to submit similar reports, are qualified to participate in the Credit Information Exchange System. b. Any participant which is not up-to-date in the submission of its reports on credit and equity exposures shall not be entitled to credit information from the System. SUBSECTION 1611.2 Procedure for the exchange of credit information a. Credit Inquiry Form 1) The prescribed credit inquiry form shall be accomplished by the requesting institution and signed by its duly authorized officer. The name(s) and specimen signatures(s), of the officer(s) authorized to sign the form, as well as subsequent changes in the authorized signatory, shall be reported to the Department of Loans and Credit, Central Bank of the Philippines. 2) Prior clearance shall be obtained from the subject of inquiry which shall be indicated by the signature of the subject in the space provided for the purpose in the credit inquiry form, duly authenticated by the requesting institution. The consent of the subject is a pre-condition to the release of the credit information to the inquiring institutions. 3) The participant shall submit to the Department of Loans and Credit, Central Bank of the Philippines, the duly accomplished credit inquiry form. The System will assign reference number for each inquiry received for identification in the credit information report. 4) The credit inquiry form shall be automatically rejected by the System if the participant is not entitled to obtain credit information by virtue of Item b of Subsec. 1611.1. 5) All inquiries received shall be acted upon immediately. If the information cannot be released immediately, for one reason or another, the participants representative shall be advised of the expected time and date of release thereof. 6) Financial intermediaries and government institutions, agencies and corporations shall not be the subject of inquiry. b. Credit Information Report 1) The reply format to be issued by the System shall indicate the inquiry number and date, but not the name of the subject. 2) The receipt of the Credit Information deport from the System shall be acknowledged by the participating institution's duly authorized representative by signing in the Register Book to be maintained for the purpose. SUBSECTION 1611.3 Available information a. List of financial institutions to which the subject has outstanding obligations. b. Aggregate amount of the outstanding obligations classified into "current" and/or "past dues" whenever applicable, of the subject with all the reporting institutions, broken down into: 1) Loans 2) Commercial papers/receivables/bonds purchased or sold with recourse 3) Lease contracts receivable 4) Stand-by letters of credit and/or guarantee 5) Regular and deferred letters of credit/authority to purchase 6) Commercial papers/receivables sold on a without recourse basis 7) Foreign borrowings c. Value of collaterals on aggregate basis. d. Aggregate equity investment of the reporting institutions with the subject corporation/individual. e. Total assets and net worth of the subject. SUBSECTION 1611.4. Sources of information . The information on the credit accommodations and equity investment of a borrower or groups of borrowers involving P1 million and above shall be based on data furnished by all banks (except rural banks), investment houses, finance companies and investment companies, including the GSIS and SSS and such other institutions which the Governor/Monetary Board may authorize to participate as compiled and computerized by the Central Bank for the purpose of credit information exchange among the participating institutions. SUBSECTION 1611.5 Costs . Initially and until revoked, revised or modified by subsequent orders/regulations, the participants shall be charged for administrative expenses a nominal fee of P50.00 for every reply to an inquiry. SECTION 1612. Clean Note Policy . In order to effect an expeditious withdrawal from circulation of unfit currency notes and allow the Central Bank to maintain a clean note policy, the guidelines and procedures embodied in Appendices 35, 36 and 37 shall strictly be observed. (As amended by CBP Circular 1176 dated May 25, 1988) SECTIONS 1613-1698. ( Reserved ) SECTION 1699. General Provision on Sanctions . Any violation of the provisions of this Part shall be subject to the provisions of Sections 34 and 34-A of Republic Act No. 265, as amended. APPENDIX 1 QUALIFICATION AND DOCUMENTATION REQUIREMENTS FOR THE ISSUANCE OF AN EXPANDED COMMERCIAL BANKING AUTHORITY (Appendix to Subsec. 1101.5) I. QUALIFICATION REQUIREMENTS IN THE GRANT OF EXPANDED COMMERCIAL BANKING AUTHORITY A. Minimum Capital Required and Public Offering of Shares . A commercial bank applying for an expanded commercial banking authority shall have a minimum capital of P500 million. For this purpose, the capital shall refer to the total of the unimpaired paid-in capital (including paid-in surplus), earned surplus and undivided profits, net of (a) such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank, and (b) total outstanding unsecured credit accommodations, both direct and indirect, to directors, officers, stockholders, and their related interests (DOSRI). Any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of bank assets shall be excluded, except as otherwise provided for (on merger and consolidation of banks); For purposes of meeting the minimum capitalization requirement for expanded commercial banking authority, a commercial bank may be allowed to acquire up to 100% of the equity of an investment house and their combined capital shall be considered for purposes of the P500 million capitalization requirement: Provided , That the bank acquires at least seventy per cent (70%) of the paid-in capital and at least seventy per cent (70%) of the voting stock of the investment house: Provided, further , That if the investment house is not wholly owned by the commercial bank, the amount of the net worth of the investment house which may be consolidated with that of the commercial bank shall be limited to the amount equal to the percentage that the investment of the bank bears to the total networth of that investment house. Likewise, as a means of meeting the minimum capitalization requirement for a bank with expanded commercial banking authority, the merger or consolidation of banks, or the merger or consolidation of a commercial bank and an investment house is encouraged. In addition to compliance with the provisions of Sections 12, 12-A, 12-B and 12-D of Republic Act No. 337, as amended, at least ten per cent (10%) of the capital of the expanded commercial bank shall be publicly offered under such terms and conditions as may be prescribed by the Monetary Board, and listed in the stock exchanges. These requirements of public offering and listing shall be complied with by all applicant banks including those which, on their own or through merger with another bank or other financial intermediaries, may be able to meet the minimum capital requirement. B. Financial Resources, Past Performance and General Compliance with Banking Laws and Regulations . 1. Applicant bank shall not have incurred deficiency in the required capital to risk assets ratio (10%) under Section 22 of Republic Act No. 337, as amended, for the year preceding the filing of application. It shall have sufficient valuation reserves to cover estimated losses. 2. Applicant bank shall not have incurred net deficiencies in its reserves against deposit liabilities and/or deposit substitute liabilities for the six-month period immediately preceding the filing of the application. In addition, such ratios as primary reserves to deposit liabilities and primary and secondary reserves to deposit and demand liabilities shall show that applicant bank is in a liquid position. 3. Applicant shall show profitable operations for the past two years preceding the filing of application. Its ratio of net earnings to average capital accounts should indicate satisfactory returns on stockholders' investments. 4. Applicant bank has substantially complied with banking laws or orders, instructions, or regulations issued by the Monetary Board or orders, instructions, or rulings by the Governor. Major/important exceptions and findings by Central Bank examiners have been corrected, satisfactorily explained, or considered closed. C. Knowledge, Competence, Experience and Integrity of Directors, and Principal Officers The Chairman and members of the board of directors and principal officers of applicant bank shall possess the minimum qualifications prescribed and none of the disqualifications mentioned in existing Central Bank regulations. The applicant bank shall indicate in the application that officers and key personnel having the appropriate training and/or experience in investment banking and related functions are available/obtainable by the bank. An updated bio-data shall be submitted by each director and principal officer, including the officers and key personnel who will handle investment banking and related functions. D. Banking Offices, Facilities, Managerial Potential Capacity, Etc . 1. The applicant bank shall have adequate banking facilities which are indicated by the following: (a) Number of banking offices in operation and their regional dispersal (b) Number of correspondent banks (c) Trust services (d) FCDU/Circular 343 (e) Quasi-banking functions (f) Electronic data processing capability (g) Other facilities 2. Applicant bank shall manifest additional managerial potential capacity as may be indicated by: (a) Number of allied undertakings (b) Number or subsidiaries and affiliates (c) Foreign creditors other than correspondent banks (d) Participation in syndicated foreign/domestic loan financing. II. PROJECT FEASIBILITY STUDY The project feasibility study to be submitted by the applicant commercial bank shall include, in addition to the regular content of such study, the following information in the format prescribed: A. Capitalization and Ownership The computation of the eligible capital accounts of the proposed EKB which is the total of the adjusted networth of the applicant commercial bank and of the commercial bank/subsidiary/investment house with which the applicant bank would merge/consolidate or invest in The list of direct and indirect loans to DOSRI which are unsecured, the original amount of the loan and date granted and the outstanding balance classified into current and past due The summary of holdings of stockholders classified as to citizenship and family/business group including the respective number of shares subscribed in the EKB and the percentage of holdings to total The list of individual stockholders grouped according to family/business group, including their TAN and citizenship, the type of shares held (voting or non-voting, common or preferred), the number of shares subscribed and the percentage of holdings to total The list of individual stockholders in EKB with equity investment in other financial institutions, the type and number of shares held and the percentage of holdings to total B. Organization and Management The proposed organization (position) chart of EKB indicating for each position the name of the personnel proposed for appointment The names of the proposed members of the Board of Directors together with their equity investments in the EKB and/or subsidiary investment house and the names of the proposed principal officers (from President down to Assistant Vice-President) and key personnel together with their proposed position Bio-data which should be prepared for each of the proposed members of the Board of Directors, principal officers and key personnel C. Banking Offices The number of offices in operation per region net of those to be phased out on account of merger/consolidation together with the percentage of regional offices to total and the type and location of additional offices proposed to be organized within the first year of operation The list of offices in operation, net of those to be phased out, grouped according to municipality/city, province and region together with the address, type of office and date opened D. Financial Capability Based on Previous Years' Operation The operating performance of the applicant commercial bank and/or subsidiary investment house for the past two (2) years prior to the filing of application as seen in the condensed statement of income and expenses and operating ratios and the financial condition of the same institutions as seen in the condensed statement of condition and balance sheet ratios Detailed statement of income and expenses of applicant commercial bank for the past two (2) years prior to filing of application Detailed statement of income and expenses of subsidiary investment house for the past two (2) years prior to filing of application Detailed statement of condition of applicant commercial bank as of the past two (2) years prior to filing of application Detailed statement of condition of subsidiary investment house as of the past two (2) years prior to filing of application Loan portfolio of applicant commercial bank classified as to industry and as to status and investment of applicant commercial bank in subsidiaries/affiliates including the number of shares held, issued, par value and net book value The list of 20 leading borrowers of applicant including the industry to which they belong, the original amount of loan, the outstanding balance and percentage of loan to total portfolio Details of each subsidiary/affiliate to which applicant commercial bank has investment including cost of acquisition, date acquired, net income after tax, earnings per share, dividends, net book value and outstanding loans with the applicant institution E. Corporate Strategy The statement of corporate strategy of EKB and the immediate and long-term goals and objectives The lending program and special policies lined up for the first five (5) years including details on guidelines and standards to be established on exposure limits, portfolio diversification, collateral requirements, geographical expansion, assistance to pioneer and priority areas of economic activities and relationship with clients Investment policies and program to be implemented within the first (5) years of operation including the broad categories of undertakings in which EKB may invest, the portfolio mix to be observed, the extent of control over subscribed capital stock and voting stock to be exercised in financial allied undertakings, quasi-banks and non-financial allied undertakings Fund generation program for the first five (5) years of operation to support the expansion in loans and investments cdlex Quarterly underwriting program for one year stating industry of issuer, the volume of underwriting business classified into equity and debt, public offering and private placement and other information F. Financial Projections The detailed statement of the underlying assumptions made in projecting the financial statements and ratios The detailed projected statement of income and expenses for the first five ( 5) years of operation The projected operating ratios for the first five (5) years of operation The actual statement of condition of EKB at month-end before filing of application and the projected statement of condition as of the first five (5) years-end of operation The projected balance sheet ratios as of the first five (5) years-end of operation The projected funds flow for the first five (5) years of operation APPENDIX 3 FORMAT OF AFFIDAVIT ON TRANSFER OF STOCKS (Appendix to Subsec. 1126.1.c) REPUBLIC OF THE PHILIPPINES) ____________________________ ) S.S. AFFIDAVIT I, _______________________________, also known as ________________, ________________, with business address at _______________________________, and residential address at _________________________________, after having been duly sworn to in accordance with law depose and state that: 1. I am the transferee of (state quantity) shares of voting stocks of (state name of bank) hereinafter to be referred to for brevity as "Bank", by virtue of (state instrument of transfer) dated ____________________. 2. In acquiring equity holding in the Bank, I acted with full awareness and understanding that the Bank is a duly organized domestic banking corporation, exercising and enjoying a right, franchise and privilege to engage in commercial banking business, decreed by law to be a nationalized industry, wherein at least seventy percent (70%), or with the authority of the Monetary Board and the approval of the President of the Philippines, sixty percent (60%) of the voting stock should be owned by citizens of the Philippines and that there exists prohibitions under the law against the holding by a corporation of voting stocks in excess of thirty percent (30%), or by any person or group of persons who are related to each other within the third degree of consanguinity or affinity or by corporations wholly-owned or majority of the voting stock of which is owned by such person or group of persons, in excess of twenty percent (20%) of the voting stock of the Bank. 3. Consonant with the policy of the Government as provided for in Commonwealth Act No. 108, as amended, otherwise known as the Anti-Dummy Law, and Republic Act No. 337, as amended, otherwise known as the General Banking Act, I hereby declare as follows a. The (state instrument of transfer) was not falsely simulated to evade the provisions of the New Constitution and Commonwealth Act No. 108 or the provisions of Republic Act No. 337, as amended, particularly Sections 12, 12-A, 12-B and 12-D imposing maximum equity holdings by any person or persons related to each other within the third degree of consanguinity or affinity, or corporations. b. The said shares of stock were acquired by me for valuable consideration from funds provided by me. c. As such transferee, I have title over the said shares of stock. 4. This Affidavit is executed for the purpose of stating under oath my bona fide title over the shares of voting stocks of the Bank, that in acquiring title over said shares I gave valuable consideration and that I shall comply with the requirements of all laws, rules, regulations and circulars with respect to my conduct as stockholder of the Bank. IN WITNESS WHEREOF, I hereby affix my signature this _________ day of ___________________, 19 ______. ___________________________ Affiant SUBSCRIBED and sworn to before me this _____________ day of _______________________, 19 ________, affiant exhibiting to me his Residence Certificate No. ______________, issued at _________________ on _____________, 19 ________. Notary Public Doc. No. _________ Page No. _________ Book No. _________ Series of 19________ MANUAL OF REGULATIONS FOR BANKS AND OTHER FINANCIAL INTERMEDIARIES (BOOK I) Insert No. 82-2 (Page App. 4-1 of Book I) As of July 31, 1982 The list of reports required of commercial banks is amended by inserting after CBP-7-16-02 KB (Statement of Condition) the following: " New Form No . Subject of Report Frequency Deadline xxx xxx xxx xxx " Report on Trust/Fund Semestral (As On or before the Management Operations an attachment to 10th day following CBP-7-16-02) end of reference semester" APPENDIX 4 ANNEX A REPORTS REQUIRED OF COMMERCIAL BANKS (Appendix to Sec. 1161) I. REPORTS WITH REVISIONS Form No. Report Title Frequency Submission Deadline Submission Procedure SUPERVISION AND STATEMENT OF CONDITION EXAMINATION SECTOR SES I Form I (CBP-7-16-01) Consolidated Daily Report Weekly 3rd banking day Original SRO of Condition after end of week One (1) copy Sch. 1 Schedule of each Other Non-Risk Assets SES I and DER-D Sch. 2 Schedule of Selected Domestic Accounts CBP-7-16-01 1 Consolidated Report of Weekly Four banking days Required and Available after end of reference Resenes Against Deposit week: Provided , however, Liabilities That for the week wherein the end of the month falls, the deadline shall be seven banking days after the end of the month or 4th banking day after end of reference week, whichever is later CBP-7-16-01.1 Report of Cash on Hand Weekly Four banking days after end of reference week: Provided, however, That for the week wherein the end of the month falls, the deadline shall be seven banking days after the end of the month or 4th banking day after end of reference week, whichever is later CBP-7-16-01.2 Special Time Deposits Weekly Four banking days after and Reserves Against end of reference week: Them (Consolidated) Provided, however, That for the week wherein the end of the month falls, the deadline shall be seven banking days after the end of the month or 4th banking day after end of reference week, whichever is later CBP-7-16-01.3 Supporting Schedule Weekly Four banking days after of Item 3a in end of reference week: CBP-7-16-01 Provided, however, That for the week wherein the end of the month falls, the deadline shall be seven banking days after the end of the month or 4th banking day after end of reference week, whichever is later CBP-7-16-01-A Report of Changes As changes Two banking days following in the Composition occur the day of change of Securities (Except Premyo Savings Bonds) Held as Reserves for Deposit Liabilities CBP-7-16-01-B Report of Changes Weekly Four banking days after in the Composition end of reference week: of Premyo Savings Provided , however , Bond Held as That for the week Reserves for wherein the end of the Deposit Liabilities month falls, the deadline shall be seven banking days after the end of the month or 4th banking day after the end of reference week, whichever is later SUPERVISION AND STATEMENT OF CONDITION EXAMINATION SECTOR SES I Form 2C Statement of Condition Quarterly Tenth (10) banking Original and (CBP-7-16-02) (By Banking Unit) day after end of duplicate copy Sch. 1 Schedule of reference request SES I Loan Portfolio and Other accommodations Sch. 2 Report on Recording Items on the Due Form/Due to Head Office, Branch and Agencies Account CBP-7-16-02-KB-A 2 Selected Financial Part I-Quarterly End of quarter Accounts Part II- End of semester Semestrally CBP-7-16-02-KB.1 Breakdown of Due Quarterly Tenth banking day From/Due Local after end of reference Banks and Domestic quarter Deposit Liabilities CBP-7-16-02-KB.2 Breakdown of Quarterly Tenth banking day Domestic Savings after end of reference Deposit quarter SES I Form 2 B Consolidated Statement Quarterly Original and published Original and (CBP-716-03) of Condition reports within twelve Published (Published Statement) (12) banking days, Report respectively, from SES I receipt of call to the bank by the SES I Director SUPERVISION AND INCOME AND EXPENSES EXAMINATION SECTOR SES I Form 3A Consolidated Statement Semestral Twenty (20) banking Original and (CBP-7-16-04) of Income, Expenses days after end of duplicate copy and Surplus (Free) calendar semester/ SES I Sch. 1 Analysis of year One copy each Undivided and Surplus DER-D and FED I (Free) Accounts SES I Form 3B Statement of Income Semestral Ten (10) banking Original and (CBP-7-16-04A) and Expenses (By days after end of duplicate copy Banking Unit) calendar semester/ SES I year SES I Form 2A.1 Consolidated Statement Monthly Seven (7) banking Original and (CBP-7-16-05) of Condition (For days after end of duplicate copy Commercial Banks month SES I without overseas offices One (1) copy Sch. 1 Analysis of each DER-D Undivided Profits Bank and FED I of the Philippines Sch. 2 Schedule of Due from Other Banks Sch. 3 Schedule of Loan Portfolio and Other Accommodations Sch. 4 Schedule of Trading Account Securities Investments and Investments in Bonds and Other Debt Instruments Sch. 5 Schedule of Equity Investments in Allied and Non-Allied Undertakings Sch. 5a Schedule of Equity Investments in and Outstanding Loans to Non-Allied Undertakings Sch. 6 Schedule of Deposit Liabilities Sch. 6a Schedule of Domestic Time Certificates of Deposits Sch. 6b Schedule of Time Certificates of Deposits CB Circular 343/547 Sch. 6c Schedule of Deposit Liabilities By Size of Account Sch. 7 Schedule of Deposits of Banks and Due to Banks Sch. 8 Schedule of Bills Payable Sch. 9 Schedule of Other Assets and Other Liabilities Under CB Circular 343/547 Sch. 10 Schedule of Inter-Office Float Items Sch. 11 Schedule of Government Funds Held Sch. 12 Report on Foreign Currency Cover Sch. 13 Schedule of Selected Accounts Under CB Circular 343/547 Sch. 14 Schedule of Domestic Standby Letters of Credit SES I Form 2A.2 Consolidated Statement Monthly Seven (7) banking Original and (CBP-7-16-05) of Condition (For days after end of duplicate copy Commercial Banks with month SES I Offices) One (1) copy (Same schedule as above) each DER-D and FED I CBP-716-07 1 Statement of Capital Weekly Four banking Required and Capital end of reference Accounts under Sec. week except for 22 or 30 of R.A. 337, report for the week as amended wherein the end of month falls in which case deadline shall be the 7th banking day after end of reference week, whichever is later CBP-7-16-07-A Daily Report on Weekly Six (6) banking Compliance with days after end of Aggregate Ceilings week if submitted as on Direct/Indirect attachment to Credit Accommodations CBP-7-16-01 (CDRC); to Directors/Officers/ four banking days Stockholders/Related after end of week if Interests (DOSRI) submitted as attachment to CBP-7-16-07 DIRECTORS, OFFICERS, STOCKHOLDERS AND RELATED INTERESTS (DOSRI) SES Form 5A.1 Daily Report on Compliance Weekly Six (6) banking Original and (CBP-7-16-07B.1) With Individual Ceiling days after end of duplicate on direct Credit week. copy SES I Accommodations to Directors/Officers/ Stockholders CBP-7-16-09 1 Consolidated Report of Weekly Four banking Available Coverage days after end Against Import Letters of reference week of Credit Outstanding except for the report for the week wherein the end of month or the 4th banking day after end of reference week, whichever is later CBP-7-16-09.1 Unmatured Advances Weekly Four banking Against Export Products days after end Supported by Letter of of reference week Credit except for the report for the week wherein the end of month falls in which case deadline shall be the 7th banking day after end of month or the 4th banking day after end of reference week, whichever is later CBP-7-16-09 2 Unmatured Advances Weekly Four banking Against U.S. Quota days after end Export Sugar (A) of reference week except for the report for the week wherein the end of month falls in which case deadline shall be the 7th banking day after end of month or the 4th banking day after end of reference week, whichever is later CBP-7-16-09 3 Unmatured Advances Weekly Four banking Against Outward Bills days after end for Collection of reference week except for the report for the week wherein the end of month falls in which case deadline shall be the 7th banking day after end of month or the 4th banking day after end of reference week, whichever is later RESEARCH SECTOR LOANS RS Form 1A (CBP-5-17-30) Report on the Amount and Weekly Not later than 4:00 Original DER-D Weighted Average Interest P.M. of Thursday Rates on Loans and after end of Discounts Granted reference week RS Form 1B (CBP-5-17-27) Daily Report on Money Daily Not later than 3:00 Original DER-D Market Transactions P.M. on reference day DEPOSITS AND DEPOSIT SUBSTITUTES RS Form 2A (CBP-5-17-33) Report on the Volume of Weekly Not later than 4:00 Original DER-D and Weighted Average P.M. Thursday Interest Rates on Deposits after end of reference week RS Form 2B (CBP-5-17-29) Report of Transactions on Monthly Not later than 2:00 Original DER-D Time Certificates of Deposits P.M. of the following With Maturities of More Than day after reference 730 Days period reference week RS Form 2C (CBP-5-17-36) Weekly Report on Quoted Weekly Not later than 2:00 Original DER-D Rates of Dollar Savings P.M. of every and Time Deposits Thursday RS Form 2C (CBP-5-17-34A) Daily Report on the Volume Daily Not later than 3:00 Original DER-D of and Weighted Average P.M. of the same Rates on Promissory day Note Issued DOMESTIC OPERATIONS SECTOR DOS Form 1 (DLC Form G) Report on Negotiations Monthly Fifteen (15) days after Original LC of Rediscounted with reference month the Central Bank II. REPORTS WITHOUT REVISIONS The Present formats of the following reports are retained but the form numbers are revised to reflect the standard form identification: Form No. Report Title Frequency Submission Deadline Submission Procedure FROM TO STOCKHOLDERS CBP-7-16-11 SES I Form 4 Consolidated List of Semestral Twelve (12) banking Original and Stockholders and and after days after end of duplicate Their Stockholdings every change calendar semester/ copy SES I year and if there are changes, seven (7) banking days after end of quarter DIRECTORS, OFFICERS, STOCKHOLDERS AND RELATED INTERESTS (DOSRI) CBP-7-16-07B SES I Form 5A Daily Report on With Weekly Six (6) banking Original and Individual Ceiling on days after end duplicate Direct Credit of week copy SES I Accommodations to Directors/Officers/ Stockholders CBP-7-16-13 SES I Form 5B Consolidated Report on Semestral Fifteen (15) Original and Compliance With banking days duplicate copy Aggregate Ceiling on after end of SES I Credit Accommodations semester to Directors, Officers, Stockholders and Related Interests SES I Form 5C (CBP-7-16-13A) Report on Stockholdings Semestral Fifteen (15) Original and of Bank's Directors/ banking days duplicate copy Officers/Stockholders, after end of SES I Their Spouses/Relatives semester in Borrowing Firms CBP-7-16-14 1 Marginal Deposits on Weekly and Fourth banking Import Letters of as changes day after end Credit and Reserves occur of reference week Against Them or 7th banking day (Consolidated) after reference week if end of SES I Form 6A Report on Outstanding Monthly Within ten (10) days Original SES I Loans Secured by Shares after the end of Duplicate of Stocks of Other reference month Corporate Analysis banks/NBQBs Office CBP-7-16-19 SES I Form 6B Report on Compliance Quarterly Ten (10) banking Original and With the Obligation to days after end of duplicate copy Withhold the Tax on quarter SES I Interest Income of Non-Resident Foreign Individuals or Corporations Not Engaged in Trade or Business in the Philippines CBP 7-16-15A SES I Form 6C Availments of Financial Semestral Fifteen (15) banking Original and Assistance to Officers days after end of duplicate copy and Employees Under reference semester SES I Central Bank Approved Plan CBP-7-16-12 SES I Form 6D Report of Dividends On every Ten (10) banking Original and Declared declaration days after date of duplicate copy Sch. 1 Schedule of dividend declaration SES I Bad Debts CBP-7-16-16 SES I Form 6E Report on New As changes Seven (7) banking Original and Schedule of Banking occur days prior to duplicate copy Days/Hours effectivity of change SES I CBP-7-16-17 SES I Form 5D Report on Compliance As loan is Twenty (20) banking Original and With Sec. 83 of R.A. approved days from date of duplicate copy 337, as Amended approval of loan SES I whether direct or indirect granted to any bank director or officer CBP-7-16-18 SES I Form 6F Biographical Data Annually and Twenty-five (25) Original and as changes banking days after duplicate copy occur end of calendar year SES I or seven banking days as changes occur or after election/ appointment of new Directors/Officers CBP-7-16-20 SES I Form 6G Report on Crimes/ As crimes or Within forty-eight (48) Original and Losses incidents hours from knowledge duplicate copy occur of crime or incident or SES I from initiation of judicial or extra judicial action or imposition of sanctions in cases involving bank personnel CBP-7-16-21 Notice/Application As write-off Twenty-five banking for Write-off of occurs days prior to the Loans and Advances intended date of write-off CBP-7-16-22 1 Consolidated Report Weekly Four banking days after of Required and end of reference week Available Reserves except for the report for Against Deposit the week wherein the end Substitutes and of month falls in which Interbank Loans case deadline shall be the 7th banking day after end of month CBP-7-16-23-KB Report on Foreign Basic Within twelve days from Currency Counterpart everytime date of foreign equity Loans foreign equity investment investments is made Commercial Within twelve banking term portion- days after end of quarter quarterly SPECIAL FORMS SES I Form 6H Notice/Application for As write-off Twenty-five (25) Original and Write-Off of Loans and occurs banking days prior duplicate copy Advances to the intended SES I date of write-off CBP-7-16-25 Sworn Statement on Monthly Fifteen banking days Quasi-Banking Operations after end of month CBP-7-16-26 4 Consolidated Report on Semestrally Not later than fifteen Loans and Advances banking days after end with Arrearages, including of each semester Interest and Charges, Amounting to at Least Twenty Per Cent (20%) of the Total Outstanding Obligations Including Interest and Charges (Pursuant to P.D. No. 385 dated January 31, 1974) CBP-7-16-26.1 4 Accounts on Which No Semestrally Not later than fifteen Foreclosure Proceedings banking days after Were Instituted (with end of each semester Total Outstanding Obligations of P500,000 and Above) CBP-7-16-26.2 4 Accounts on Which Semestrally not later than fifteen Foreclosure Proceedings banking days after Were Instituted with end of each semester Total Outstanding Obligations below P500,000) CBP-7-16-26.3 4 Accounts on Which Semestrally not later than fifteen Foreclosure Proceedings banking days after Were Instituted But end of each semester Without Court Injunction/Restraining Order (with Total Outstanding Obligations of P500,000 and above) CBP-7-16-26.4 4 Accounts on Which Semestrally not later than fifteen Foreclosure Proceedings banking days after Were Instituted But end of each semester Without Court Injunction/Restraining Order (with Total Outstanding Obligations below P500,000) CBP-7-16-26.5 4 Accounts with Court Semestrally not later than fifteen Injunctions or banking days after Restraining Orders end of each semester Issued against Foreclosure Proceedings Instituted (Accounts with Total Outstanding Obligations of P500,000 and Above) CBP-7-16-26.6 4 Accounts with Court Semestrally Not later than fifteen Injunctions or banking days after Restraining Orders end of each semester Issued Against Foreclosure Proceedings Instituted (Accounts with Total Outstanding Obligations below P500,000) CBP-7-16-26.7 4 Foreclosed Properties Semestrally Not later than fifteen Acquired by Bank/ banking days after Institution end of each semester CBP-7-16 CBP-7-16-26.7 Consolidated Report on the Monthly Twelve banking days Utilization of Loanable from end of reference Funds Generated Which month Were Set Aside for Agrarian Reform/ Agricultural Credit CBP-7-16-27.A Monthly Consolidated Monthly Twelve banking days Report of Existing from end of reference Eligible Government month Securities Held for Temporary Investment CBP-7-16-28 5 Semestral Report of Semestrally Fifteen banking Outstanding Loans days after end if Classified by Types of semester Industry CBP-7-16-29 Application for the Everytime Not later than the Temporary Use of application banking day immediately CBCIs and Other is to be made following the day when the Government Securities bank incurred a reserve with Remaining Maturities deficiency of Less than Two (2) Years, Not Otherwise Eligible as Reserves Against Deposit Liabilities CBP-7-16-30 Application for the Temporary -do- Not later than the banking day Use of Export Bills with immediately preceding the day Maturities Not More Than when the bank intends to start Thirty (30) Days As Eligible the fifteen-day period Reserve against Marginal Deposits on Import Letter of Credit CBP-7-16-31 SES I Form SE Sworn Statement on Real As transaction Ten (10) banking days Original and Transactions is approved after approval of duplicate copy transaction SES I CBP-7-16-32 Loans/Credits Granted Quarterly Ten banking days from to Builders or end of reference quarter Purchasers of Units/Shares (effective June 15, 1979) in Condominium Projects, Country Clubs, Sports Clubs and Other Real Property Developments CBP-7-16-35 Report on Credit and Equity P20 M and On or before the 10th Exposures to Individuals/ above exposure day of the month Companies Groups every first and following the reference Aggregating P1/P20 Million second month month and above of the quarter P1 M and above On or before the 15th exposure day of the month quarterly following reference quarter CBP-7-16-35-DCSB Revised report on trust and Quarterly Ten banking days from fund management operations end of reference quarter, (Effective February 28, 1983) CBP-7-35.A Schedule of Total Assets and (to follow (to follow deadline of above Networth of Borrowers, frequency of report to which attached Issuers, Lessees and above report Accountees Reported in to which attached) Secs. I to VII of CBP-7-16-35 CBP-7-16-36-EKB Report on Outstanding Semestrally Fifteen banking days from end Equity Investments in and every semester Outstanding Loans to Non-Allied Enterprises CBP-5-17-35.A Report on the volume Monthly Not later than 5 banking days of and interest rates on after end of reference month credit line availments under (Effective April 28, 1983) Short Term Prime Rates CBP-SES-I.01 Required and Available Weekly Three banking days after end Reserves Against Marginal of reference week Deposits CBP-SES-I.02 Required and Available Weekly Three banking days after end Reserves Against of reference week Special Time Deposits CBP-SES-I.03 Required and Available Weekly Three banking days after end Reserves Against Deposit of reference week Substitutes CBP-SES-I.04 Required and Available Weekly Three banking days after end Reserves Against Deposit of reference week (Effective Liabilities June 8, 1984) Unnumbered Outstanding loans served Monthly Within 10 banking days after by pledges/assignment of the end of reference month shares of stock (whether partially or fully secured) Unnumbered Reconciliation Statement Yearly Not later than end of January Office and All Branches of the following year Unnumbered Unresponded or Outstanding As necessary Within 30 days of the six-month Items for Over Six (6) Months period as of Date of the Reconciliation Statement Unnumbered State of Department Profit Quarterly Thirty days after end of quarter and Loss Unnumbered Annual Report of Annually Management to Stock- holders Covering Results of Operations for the Past Year Unnumbered Audited Financial Statements Annually Ninety days after the start for the Past year Prepared by of the audit the External Auditor Unnumbered List of Members of the Board -do- Twenty-five banking days of Directors and Officers after annual election Unnumbered Report of Domestic Standby Monthly Ten banking days after end Letters of Credit of month Unnumbered Statement of Condition Monthly Ten banking days after end of the assets and liabilities of every month of all branches/agencies/ offices/abroad of domestic banks Unnumbered Report of income and Semestrally Ten banking days after end expenses of all branches/ of every semester agencies/offices abroad of domestic banks Unnumbered Letter-format to be Annually Ten (10) days from election/ accomplished to facilitate assumption of office of Board updating of Central Bank of Directors Records Footnotes 1. Banks which have adopted the Consolidated Report of Condition (CDRC), the replacement form CBP-7-16-01, CBP-7-16-09, CBP-7-16-14 and CBP-7-16-22, shall continue to submit the CDRC within 6 banking days after reference weeks. 2. To be submitted in lieu of CBP-7-16-02 KB and CBP-7-04 A by extension office/savings agency/sub-branch/money shop under the supervision of another branch/office. 3. Indicate PNB, LBP, PAB, or DBP for reports of the government banks. 4. These reports are for government financial institutions only. 5. For DBP only. * An enterprise applying under List B will be entitled to tax free importation of machinery only if said enterprise agrees to export at least 50% of its total production. Categories Reports: Category A-1 CBP-7-16-03 KB (Consolidated Statement of Condition Published) Category A-2 CBP-7-16-02 KB (Statement of Condition) and CBP-7-16-05 (Consolidated Statement of Condition) Category B All other reports not mentioned in Category A-1 and A-2 above. ANNEX B SCHEDULE OF REPORTS OF COMMERCIAL BANKS FOR REPLACEMENT BY THE NEW FORMS LISTED IN ANNEX "A" FORM NO . REPORT TITLE DAILY DER DOMESTIC CBP-5-17-27 Daily Report on Money Market Transactions CBP-5-17-34A Daily Report on the Volume of and Weighted Average Interest Rates on Promissory Notes Issued for the day WEEKLY SES-I CBP 7-16-01 Consolidated Daily Report of Condition CBP 7-16-01B Report of Changes in the Composition of PSB Held as Reserves for Deposit Liabilities CBP 7-16-07B Daily Report on Compliance with Individual Ceiling on Direct Credit Accommodations to DOS CBP 7-16-07B.1 Daily Report on Compliance with Individual Ceiling on Direct Credit Accommodations to DOS DER DOMESTIC CBP-5-17-28 Consolidated Weekly Reports on Domestic Credits CBP-5-17-33 Report on the Volume of and Weighted Average Interest Rates on Deposits and Loans CBP-5-17-36 Weekly Report on Quoted Rates of Dollar Savings and Time Deposits MONTHLY SES I CBP 7-16-05 Consolidated Statement of Condition Sch. 1 Schedule of Loan Portfolio Sch. 2 Schedule of Investment Accounts Sch. 3 Schedule of Due From/Due to Local Banks and Deposits of Private and Government Banks Sch. 4 Schedule of deposits Sch. 5 (Quarterly) Computation of Investment to Deposit Ratio Sch. 6 Schedule of Bills Payable Sch. 7 Schedule of Government Funds Held Sch. 8 Schedule of Reconciling Items Lodged in Inter- Office Float Items (DR./CR.) (Quarterly) Schedule on Status of O/S Loans to DOSRI CBP-7-16-25 Sworn Statement on Quasi-Banking Operations CBP-7-16-33 Consolidated Report on Matching of O/S Purchases/Acquisitions of Receivables Against O/S Bills Payable Deposit Substitutes of 730 Days or less CBP-7-16-34 Consolidated Report on Matching of O/S Loans/Purchases/Acquisitions of Receivables Against O/S Time Deposits/Deposit Substitutes with Maturity of More than 730 Days Unnumbered Report of Domestic Standby Letters of Credit Report on Outstanding Loans Secured by Shares of Stocks of Other Banks/NBQBs DER-DOMESTIC CBP 5-17-29 Report of Transactions on Time Certificate of Deposits with Maturity of 730 days CBP-5-17-30 Consolidated Report on Loans and Discounts (Granted with original maturity of more than 365 days) DLC DLC Form G Report on Negotiations of Account Rediscounted with Central Bank QUARTERLY SES I CBP 7-16-02 Statement of Condition CBP-7-16-02.A Selected Financial Accounts (Part I) CBP-7-16-02.1 Breakdown of Due From/Due to Local Banks and Domestic Deposit Liabilities CBP-7-16-02.2 Breakdown of Domestic Deposits CBP-7-16-03 Consolidated Statement of Condition (Published Statement) CBP-7-16-19 Report on Compliance with the Obligations to Withhold the Tax on Interest Income of Non-Resident Foreign Individuals or Corporations Not Engaged in Trade or Business in the Philippines. CBP-7-16-23 Report on Foreign Currency Counterpart Loans CBP-7-16-32 Loans/Credits Granted to Builders or Purchasers of Units/Shares in Condominium Projects, Country Clubs, Sports Clubs and Other Real Property Developments Unnumbered Statement of Departmental Profit and Loss (MAAB 2976) SEMESTRAL SES I CBP-7-16-02A Selected Financial Accounts (Part II) CBP-7-16-04 Consolidated Report of Income, Expenses and Surplus (Free) CBP-7-16-04A Report of Income and Expenses (By Banking Unit) CBP-7-16-11 List of Stockholders and Their Stockholdings CBP-7-16-13 Consolidated Report on Compliance with Aggregate Ceiling on Credit Accommodations to DOSRI CBP-7-16-13A Report on Stockholdings of Banks' Directors/Officers/Stockholders, Their Spouses/Relatives in Borrowing Corporations/Associations/Firms CBP-7-16-15 Consolidated Report on Compliance with Individual Ceiling on Direct Credit Accommodations to DOS CBP-7-16-15 Availments of Financial Assistance to Officers and Employees Under Central Bank Approved Plan CBP-7-16-15C Contingent Account of DOSRI CBP-7-16-36 EKB Report on Outstanding Equity Investments in and Outstanding Loans to Non-Allied Enterprises ANNUAL Unnumbered Reconciliation Statement Between Head Office and All Branches Unnumbered Unresponded or O/S Items for 6 Months as of Date of Reconciliation Statement AS NEED ARISES CBP-7-16-12 Report on Dividends Declared Sch. 1 Schedule of Bad Debts CBP-7-16-16 Report on New Schedule of Banking Days/Hours CBP-7-16-17 Report on Compliance of Sec. 83 of R.A. 337, as amended CBP-7-16-18 Biographical Data CBP-7-16-20 Report on Crimes/Losses CBP-7-16-21 Notice/Application for Write-Off of Loans and Advances CBP-7-16-23 Report on Foreign Currency Counterpart Loans (Basic) CBP-7-16-31 Sworn Statement of Real Estate Transactions CBP-7-16-01.A Report of Changes in the Composition of Securities Held as Reserves for Deposit Liabilities APPENDIX 5 FORMAT RESOLUTION FOR SIGNATORIES OF CATEGORY A-1 REPORTS OF COMMERCIAL BANKS (Appendix to Subsec. 1161.1) RESOLUTION NO. _____________ Whereas, it is required by Subsec. 1161.1 that Category A-1 reports be signed by the institution's President or Senior Executive Vice-President and by the Chief Finance Officer (i.e., Controller or Chief Accountant); Whereas, it is also required that aforesaid officers of the institution be authorized under a resolution duly approved by the institution's Board of Directors; cdtech Whereas, we, the members of the Board of Directors of ( Name of institution ) are conscious that, in designating the officials who would sign said Category A-1 reports, we are actually empowering and authorizing said officers to represent and act for or in behalf of the Board of Directors in particular and ( Name of institution ) in general; cdpr Whereas, this Board has full faith and confidence in the institution's President or the Senior Executive Vice-President and its Chief Finance Officer (Controller or Chief Accountant) and, therefore, assumes responsibility for all the acts which may be performed by aforesaid officers under its delegated authority; Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby resolved that: 1. Mr. _______________________, President _______________________ Specimen. Signature 2. Mr. _______________________, Senior Exec. _______________________ Vice-President Specimen Signature and 3. Mr. _______________________, Chief Finance Officer (or Controller or Chief Accountant) _______________________ Specimen Signature are hereby authorized to sign the Bank's published/condensed statement of condition of _______________________. (Name of Institution) Done in the City of _______________________, Philippines, this ___ day of _______________, 19 ___. CHAIRMAN OF THE BOARD DIRECTOR DIRECTOR DIRECTOR DIRECTOR DIRECTOR DIRECTOR ATTESTED BY: CORPORATE SECRETARY APPENDIX 6 FORMAT RESOLUTION FOR SIGNATORIES OF CATEGORY A-2 REPORTS OF COMMERCIAL BANKS (Appendix to Subsec. 1161.1) RESOLUTION NO. _______ Whereas, it is required by Subsec. 1161.1 that Category A-2 reports be signed by the institution's President or Senior Executive Vice-President; Whereas, it is also required that aforesaid officers of the institution be authorized under a resolution duly approved by the institution's Board of Directors; Whereas, we, the members of the Board of Directors of ( Name of institution ), are conscious that, in designating the officials who would sign said Category A-2 reports, we are actually empowering and authorizing said officers to represent and act for or in behalf of the Board of Directors in particular and ( Name of institution ) in general; Whereas, this Board has full faith and confidence in the institution's President or Senior Executive Vice-President and, therefore, assumes responsibility for all the acts which may be performed by aforesaid officers under its delegated authority; Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby resolved that: Name of Specimen Position Name of Report Officer Signature Title Banking Office No . (For Consolidated Statement and H. O. Quarterly Statement of Condition) ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ 1. Mr. ____________________________________ President or Mr. ____________________________________ Senior Exec. Vice-President (For reports of Banking Office/Unit other than Head Office) 2. Mr. ____________________________________ Manager/Officer-in-Charge are hereby authorized to sign Category A-2 reports of ( Name of Institution ). Done in the City of _______________________, Philippines, this ___ day of _____________, 19 ___ CHAIRMAN OF THE BOARD DIRECTOR DIRECTOR DIRECTOR DIRECTOR DIRECTOR DIRECTOR ATTESTED BY: CORPORATE SECRETARY APPENDIX 7 FORMAT RESOLUTION FOR SIGNATORIES OF CATEGORY B REPORTS OF COMMERCIAL BANKS (Appendix to Subsec. 1161.1) RESOLUTION NO. _________ Whereas, it is required by Subsec. 1161.1 that Category B reports be signed by the institution's authorized signatories; Whereas, it is also required that aforesaid officers of the institution be authorized under a resolution duly approved by the institution's Board of Directors; Whereas, we the members of the Board of Directors of ( Name of institution ) are conscious that, in designating the officials who would sign said Category B reports, we are actually empowering and authorizing said officers to represent and act for or in behalf of the Board of Directors in particular and ( Name of institution ) in general; Whereas, this Board has full faith and confidence in the institution's authorized signatories and, therefore, assumes responsibility for all the acts which may be performed by aforesaid officers under its delegated authority; Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby resolved that: Name of Authorized Specimen Position Report Signatory/Alternate Signature Title No . 1. Authorized (Alternate) _________ _________ _________ 2. Authorized (Alternate) _________ _________ _________ etc. are hereby authorized to sign the named reports. Done in the City of _______________________, Philippines, this ___ day of _____________, 19 ___ CHAIRMAN OF THE BOARD DIRECTOR DIRECTOR DIRECTOR DIRECTOR DIRECTOR DIRECTOR ATTESTED BY: CORPORATE SECRETARY APPENDIX 8 CERTAIN INFORMATION REQUIRED FROM BANKS AND NON-BANK FINANCIAL INTERMEDIARIES (Appendix to Subsec. 1161.3) 1. Name of Institution 2. Address 3. P.O. Box Number 4. Cable address or cable code 5. Board of Directors including Corporate Secretary: a. Names of Chairman, Vice-Chairman and Directors b. Number of directors per By-Laws c. Number of vacancies in the Board d. Names of corporations where they serve as Chairman of the Board or as President and names of other business enterprises of which they are proprietors or partners e. For the Corporate Secretary, indicate if he is also a director f. Date of annual election of directors per By-Laws 6. Executive officers including Auditor: a. Names and titles b. Telephone Number of each officer (office) c. For the Executive Vice-President, state the names of corporations where he serves as Chairman of the Board and names of other business enterprises of which he is proprietor or partner d. For Vice-Presidents and other officers with non-descriptive titles, indicate area of responsibility, e.g., Vice-President for Operations or Vice-President, International Department e. For commercial banks, DBP, Land Bank and Amanah Bank, include from President to Department Heads 7. Branches, agencies and extension offices: a. Name of branch, agency or extension office, e.g., Quiapo Branch or Makati Agency b. Address c. Names and telephone numbers of: (1) Manager (2) Cashier (3) Accountant d. For agencies and extension offices, indicate name of mother branch. APPENDIX 9 DOCUMENTS/INFORMATION ON ORGANIZATIONAL STRUCTURE AND OPERATIONAL POLICIES (Appendix to Subsec. 1161.3) 1. Chart of the firm's organizational structures or any substitute therefor; 2. Name of departments/units/offices with their respective functions and responsibilities; 3. Designations of positions in each department/unit/office with the respective duties and responsibilities; 4. Manual of Instructions or the like embodying the operating policies/procedures of each department/unit/office, covering such areas as: a) Signing/delegated authority; b) Procedure/flow of paper work; and c) Other matters. 5. Memoranda-Circulars or the like issued covering organizational and operational policies; 6. Sample copies of each of the forms/reports used by each office/unit/department other than those submitted to the Central Bank; and 7. Such other documents/information which may be required from time to time by the supervisory/regulatory department concerned. APPENDIX 10 FORMAT CERTIFICATION ON COMPLIANCE WITH RULES AND REGULATIONS ON BANK PROTECTION (Appendix to Subsec. 1167.6) I hereby certify to the best of my knowledge and belief that the security program that this bank has developed and is administering equals or exceeds the standards prescribed by Central Bank rules and regulations, that such security program has been reduced to writing, approved by this Bank's Board of Directors in Resolution No. ______ dated ______ and retained by this Bank in such form as will readily permit determination of its adequacy and effectiveness. LLcd I hereby further certify that the bank Security Officer has provided for the installation, maintenance and operation of appropriate security devices as prescribed by the aforementioned rules and regulations. ______________________ President or Authorized Officer ______________________ Date APPENDIX 11 TIPID MOVEMENT MANUAL (Appendix to Subsec. 1215.1) I. Concept The TIPID Movement is a school savings project of the National Commission on Savings. The name of the movement is derived from the Tagalog word "Tipid" which means thrift. It is also an acronym for Thrift Incentives for Progress through Industry and Discipline which sums up the philosophy behind the project. Thus the title suggests the training of school children in the habit of thrift and the mobilization of their small savings through the medium of banks. Savings may come from income derived through the children's labor and industry or through postponement of present spending in favor of satisfying more important future needs. The TIPID Movement, which is being implemented by the Department of Education and Culture, the banks and the Central Bank, is aimed towards instilling in students the benefits to be gained from the good habit of saving in banks for himself in particular, and for the nation in general. II. Purpose Saving is a desirable habit and a form of discipline that ought to be developed in a person at an early age. The purpose of the TIPID Movement therefore is to inculcate in school children the habit of thrift and teach them the value and advantages of saving in banks. III. Savings Club The principal instrument of action of the TIPID Movement is the Savings Club which will be organized in all elementary and secondary schools, both private and public, in the entire country. It is, therefore, advisable that savings clubs be organized as early as possible. A. Objectives of the Club 1. To encourage the habit of thrift among school children and motivate them to save in banks. 2. To seek and develop sources of income for its members; and 3. To promote the role of the savings club as an effective savings vehicle for the students. B. Club Members Every student in the elementary and secondary schools, both public and private, is eligible to be a member of the TIPID savings club organized in his class or grade level. C. Club Officers The savings club is an organization of, by, and for the school children. As such, its officers shall be chosen exclusively from among its members. D. Responsibilities of Officers The primary responsibility of the club officers shall be to administer the affairs of the club. They shall formulate and implement measures that will help in achieving the club's objectives. The savings club shall choose its depository bank. In the case of schools where there are more than one savings club (i.e., each class or grade has a savings club), a committee consisting of their respective presidents or representatives assembled for the purpose shall choose one depository bank for the entire school. The chosen depository bank shall be advised officially by the president of the club or, as the case may be, by the chairman of the committee, of its designation, the advice to be attested to by the head or principal of the school. E. Club Adviser The teacher-in-charge of the class shall serve as adviser of the savings club and, as such, shall guide the officers of the club in the formulation and implementation of the programs and projects of the club. The moral influence of the teacher-adviser will play an important role in the accumulation of savings by the club members. Under the guidance of the teacher-adviser, the savings club shall set a savings goal on a daily, weekly, or monthly basis for the club. The adviser may, when needed, set aside for the activities of the club, a class period such as the social studies period. To enable them to gain knowledge of banking, school children shall be encouraged under the TIPID Movement to transact directly with banks or the bank's solicitors in the schools. The teacher-adviser shall foster this objective of the Movement by refraining from taking custody of, or assuming responsibility for, the money of the children. IV. Sources of Savings Under the TIPID Movement, savings, to be meaningful, should come primarily from income generated through the productive efforts of the student himself. Thus, an integral part of the TIPID Movement is the encouragement of students to engage in productive endeavors such as: 1. raising a backyard garden (vegetables, ornamental plants, flowering plants, etc.); 2. running errands and doing odd jobs; 3. making leather, wood, and other handicraft products; 4. buying and selling scrap paper, old newspapers, etc.; and 5. running other small scale or home industries. The assistance of government agencies, particularly barangay and civic organizations, may be sought in this regard. V. Participation of Banks in the Movement All banks are eligible to participate in the TIPID Movement. However, a participating bank shall have to notify the Central Bank Committee on Savings. This notification may be in the form of a letter of manifestation to be submitted by the bank together with the advice of the school savings club that it has been chosen the depository bank. A bank which is not the official depository bank of any school savings club but which services deposits of school children may also participate in the Movement by notifying the Central Bank Committee on Savings. When promoting the TIPID Movement, participating banks may distribute gifts or "giveaways" beyond the 30-day limit stipulated under Subsec. 1261.2 and may be allowed to do so even on occasions other than (a) the inauguration or transfer of office; (b) a bank anniversary celebration; and (c) the Christmas season. However, all other provisions governing the distribution of gifts or "giveaways" shall be complied with. Banks are urged to encourage and support school projects which will help generate income for students. Bank officers are also encouraged to appear in symposia and other less formal gatherings inside the school premises for the purpose of motivating school children to save. A. Depository Bank 1. Any bank may be the depository of the accumulated savings of the members of the school savings club. 2. In areas where there exists only one bank, that bank shall, as a matter of course, be the depository bank. 3. In towns/cities where there is more than one bank, the depository bank shall be the one chosen by the school savings club. B. Solicitation The depository bank is authorized to solicit deposits of students within the premises of the school. Whenever practicable or within its means, therefore, the depository bank should send a solicitor to the school to service deposits and withdrawals of the students. The following shall be observed by the solicitor when servicing deposits and withdrawals: 1. The authorized solicitor who shall be properly bonded, shall present a letter of introduction addressed to the head of the school, together with the bank's prescribed identification card which the solicitor shall wear at all times during the solicitation. 2. Depositors shall be required to accomplish "Signature cards" when opening an account. 3. Pre-numbered deposit slips, in duplicate, shall be used. The duplicate shall be given to the depositor and the original retained to serve as posting medium. 4. With proper safeguards, withdrawals may also be effected through the bank solicitor. 5. At the close of every solicitation day, a Report of Deposit Collection shall be accomplished in triplicate (original to bank, and a copy each to solicitor and school) by the solicitor. Inclusive number of used deposit slips, accomplished withdrawal and collection slips as shown in the report shall be turned over to and acknowledged by the cashier. 6. Passbooks shall be returned to the depositors not later than the following soliciting day. A copy of the Report of Deposit Collection of the last soliciting day shall be submitted to the head of the school. 7. The bank shall arrange with the school the dates, place and time of solicitation and shall post notices thereof in a conspicuous place in the school premises. C. Quarterly Report To enable the Central Bank to monitor effectively the trend of savings deposits under the TIPID Movement, banks shall submit a quarterly report form duly accomplished not later than fifteen (15) banking days from the end of the quarter covered by the report. For purposes of the quarterly report, TIPID Movement accounts shall consist of all student deposit accounts in participating banks of elementary and secondary schools. VI. Presidential Decree on Deposits of Minors Under Presidential Decree No. 734 dated June 25, 1975, minors who are at least seven (7) years of age, able to read and write, have sufficient discretion, and are not otherwise disqualified by any other incapacity, are given special capacity and power, in their own right and in their own names, to make savings or time deposits with and withdraw the same as well as receive interest thereon, from banking institutions without the assistance of their parents or guardians. Parents and guardians, however, may deposit for their minor children and wards, respectively. APPENDIX 12 SEC PRESCRIBED FORMAT FOR CERTIFICATION ON DEPOSIT (Appendix to Subsec. 1262.2) ___________________ (Date) The Securities and Exchange Commission Greetings: This is to certify that there is on deposit with this bank the sum of ___________ __________________________________________ (P ___________) in the name of ___________________________________________________ Treasurer-in-trust for ____________________________________ which is in the process of incorporation. The said deposit is clear and free from liens, restriction, condition or holdout and may be withdrawn in behalf of said company upon presentation of proof of due incorporation thereof. _______________________ (Bank) By: ______________________ (Designation) SUBSCRIBED AND SWORN to before me this __________ day of ________ 19___, at ___________________________ affiant exhibiting to me his/her Residence Certificate No. A _______________________, issued at _______________________ on ______________, 19___. Notary Public Until December 31, 19 ______________ PTR No. ________________________ Issued at ________________________ On ____________________________ Doc. No. _____ Page No. _____ Book No. _____ Series of 19 ____ APPENDIX 13 FOURTH EXPORT PRIORITIES PLAN OF THE BOARD OF INVESTMENTS (Appendix to Subsec. 1273.1.c) LIST A: EXPORTABLE PRODUCTS OF EXISTING FIRMS Food Processing 1. Processed meat including canned, chilled or frozen, dried, salted or dehydrated meat LLphil 2. Processed sea foods including canned, chilled, or frozen, dried or salted or dehydrated sea foods 3. Processed milk 4. Frozen specialties 5. Processed fruits and vegetables including juices, canned, chilled or frozen, dried, salted or dehydrated 6. Dried roots 7. Coffee, processed 8. Spices such as processed ginger, pepper, onion, garlic 9. Cereal preparations 10. Flour 11. Starches 12. Agar-agar 13. Vegetable cooking oils and lard 14. Margarine, butter, and cheese 15. Fish sauce 16. Confectionery 17. Cocoa and cocoa preparations such as cocoa butter 18. Chocolate and chocolate preparations 19. Noodles 20. Biscuits and cookies; cones 21. Catsup 22. Baking powder 23. Brewer yeast 24. Peanut butter 25. Chewing gum 26. Coconut syrup 27. Food coloring such as atsuete 28. Soft drinks 29. Beer 30. Fruits and flower wine 31. Alcoholic products such as rum, whisky and gin 32. Vinegar, all kinds 33. Brewery spent grains 34. Processed cheese 35. Processed poultry products Processed Rubber Products 1. Crumb rubber 2. Camel back 3. Rubber tires and inner tubes 4. Rubber gloves 5. Rubber toys and sporting goods 6. Rubber tiles 7. Rubber shoes 8. Rubber sandals 9. Rubber slippers 10. Bonding cement 11. Rubber cement 12. Rubber and thread gums 13. Tube rubber 14. Rubber automotive parts such as vibration dampers caps, weather strips, handles and pedals, carpet underlay made of rubber 15. Curing tube and sectional air bag Chemicals and Chemical Products 1. Motor gas and diesel 2. Chlorine liquid and chlorine compounds 3. Carbon black 4. Acetylene black 5. Hydrochloric acid 6. Sulphuric acid 7. Acid oils, fatty acid and fatty alcohols 8. Iron oxide 9. Silica gel 10. Calcium carbide 11. Alcohol rectified and refined, distilled and denatured 12. Fertilizers; organic and inorganic 13. Paints, pigments, varnishes and related products 14. Ink 15. Cosmetic, perfumery 16. Soaps and detergents 17. Wax and wax products 18. Glues 19. Pyrotechnic explosives 20. Matches 21. Insecticides, pesticides 22. Mosquito coils 23. PVC tiles 24. Alkyd resins 25. Charcoal 26. Photographic chemicals 27. Glycerine, refined and crude Metallic Products 1. Manganese concentrates LLjur 2. Silver concentrates and bars 3. Perro-alloys 4. Metal castings; rough, finished and semi-finished 5. Metal rods, bars, angles, shapes and sections, of iron or steel (hot-rolled, forged, extruded cold-formed or cold-finished) 6. Iron and steel plates, coils and sheets, including G.I. sheets 7. Steel, aluminum and copper wires 8. Pipes and tubes; B.I., G.I., spiral welded or aluminum 9. Prefabricated and fabricated structural products made of iron and steel and cement 10. Steel drums 11. Pails 12. Compressed gas cylinders and similar pressure containers of iron and steel 13. Insulated cable wires 14. Nails, bolts, nuts 15. Grinding balls 16. Aluminum sheets and foil 17. Tin plates 18. Tin cans 19. Household utensils made of metal including enamelled 20. Kitchen appliances and tools, hand-operated such as meat grinders, coconut graters 21. Cutlery such as scissors, blades, tailor's shears, shovels, spades, rakes, saws, knives 22. Razor blades 23. Metallic closures and screw caps 24. Building hardware such as hinges, door knobs, door bolts and window rotor-operators 25. Vault doors (e.g. insulated vault doors) 26. Safes (e.g. record safes and tapeguards) 27. Strong boxes, armored and reinforced strong room doors and compartments and fittings (e.g. insulated filing cabinets) 28. Filing cabinets, racks, sorting boxes, paper trays, paper rests and similar office equipment of base metal 29. Wrought iron furniture 30. Gas lamps 31. Firearms and ammunitions 32. Toys and sporting goods 33. Pyrite cinders or iron sulfite Non-Metallic Products 1. Marble slabs, tile chips and curios 2. Processed marble blocks 3. Cement additives 4. Lime 5. Cement and clinker 6. Cement floor tiles 7. Asbestos tiles 8. Pipes and tubes, asbestos cement 9. Roofing tiles and fire bricks 10. Refractories 11. Clay products such as pottery, roofing tiles and paste frits 12. Ceramic products such as tiles (Glazed, Vitrified), sanitary ware sinks, bidets, etc., except dinnerware 13. Glass and glass containers such as sheet glass, window panes, optical glass, bottles 14. Safety glass 15. Reinforced fiber glass products 16. Pyrite (unroasted) (roasted) Machinery and Equipment and Parts 1. Agricultural equipment and components 2. Process equipment and components 3. Transport equipment and components 4. Construction equipment and components 5. Ricemills and parts thereof 6. Sewing machines 7. Tractor parts 8. Parts of trucks, passenger trucks, automobiles and other commercial vehicles 9. Bicycles Electrical Products Machines and Parts 1. Welding electrodes 2. Fire extinguishers 3. Dry cell batteries 4. Storage batteries 5. Motor control center 6. Fire alarm systems 7. Panelboard 8. Electric lamps and bulbs, incandescent and fluorescent 9. Electrical appliances such as electric fans, toasters, refrigerators, TV 10. Bus ducts 11. Light dimmers 12. Formed aluminum parts such as door shelves, food shelves, and/or parts thereof 13. Wire screens 14. Hermetic compressors 15. Evaporators 16. Condensers and heat exchangers 17. Electronic equipment, parts and components 18. Fluorescent and mercury lamp ballasts Wood Products 1. Caskets aisadc 2. Carvings and lattice works 3. Pallets 4. Shelves 5. Sandals and shoes 6. Toys and sporting goods 7. Parquet tiles 8. Bamboo products 9. Prefabricated houses and components except lumber 10. Gun stocks 11. Cabinets 12. Mouldings 13. Doors and fixtures 14. Furniture, complete or knocked down and parts 15. Boxes and crates Pharmaceutical Products 1. Drugs and other pharmaceuticals 2. Wadding, gauze, bandages, adhesives, similar articles 3. Sanitary napkins 4. Talcum powder 5. Dentures Fiber Products 1. Coconut coir 2. Bags, kenaf, jute, synthetic 3. Carpets and rugs 4. Cordage, twines, rope, fishing nets, abaca and synthetic 5. Wigs and hair pieces Textile Products 1. Textile yarns and fabrics, cotton and synthetic and their blends 2. Fabrics of abaca, sinamay, burlap, jusi, pineapple and other bast fibers 3. Specialty garments such as laces, garters and band 4. Embroideries 5. Garments 6. Gloves 7. Hosiery 8. Tablecloths 9. Mosquito nets Paper Products 1. Cigarette paper 2. Tissue (napkin) 3. Bond 4. Carbon paper including diazo papers, electrostatic copy papers 5. Boxes and packaging materials 6. Containers of paperboard 7. Books, pamphlets, magazines and other printed matters Other Products 1. Fish Meal 2. Animal and poultry feeds 3. Cigarettes 4. Garment hangers of wood, plastics or metal 5. Advertising materials 6. Threads of cotton or synthetic fibers 7. Jewelry 8. Cultured pearls 9. Plaques and trophies 10. Cufflinks 11. Pins, safety or dressmaker's 12. Buttons 13. Zippers 14. Paintings 15. Handicrafts such as lampshades, placemats, shellcraft, hats, household utensils, toys, and sporting goods 16. Travel goods 17. Leather products such as purses, wallets, belts, straps, gloves, footwear 18. Tanned leather 19. Plastic products such as light diffusers, footwear, containers, sheets, raincoats, packaging materials, brushes, brooms, gloves, toothbrushes, toys and sporting goods, optical frames 20. School and office supplies such as fasteners, pencils, folders, paperclips, pens and holders, bookbinders, rulers, desk pieces, etc. 21. Musical instruments and parts Pianos and parts thereof Guitars and ukuleles Violins Harmonicas LIST B: EXPORTABLE PRODUCTS OF PREFERRED AREAS OF INVESTMENTS * 1. Processed fruits and vegetables (NP) 2. Glucose powder (including cassava starch production) (NP) 3. Rice bran oil (P) 4. Agar-agar (NP) 5. Refined glycerine (NP) 6. Processed shrimps and shellfish (NP) 7. Activated carbon (P) 8. Furfural (P) 9. Essential oils (NP) 10. Blackboard and blackboard cores (NP) 11. Cellulosic staples for specialty pulp (P) 12. Footwear (NP) 13. Ferro-alloys (NP) 14. Hermetic compressors (P) 15. Electronic parts and components such as transistors, diodes, printed circuit boards, integrated circuits, variable resistors and rotary switches (P) 16. Electric welders (NP) 17. Pliers and wrenches (P) 18. Motor vehicle transmission (P) 19. Knitted fabrics a. Flat (NP) b. Circular ( NP) Condition: At least 70% of total production must be exported. casia 20. Garments (NP) Condition: At least 70% of total production must be exported. APPENDIX 14 PRO-FORMA CERTIFICATION COVERING LIQUIDATION OF PACKING CREDITS REDISCOUNTED WITH THE CENTRAL BANK (Appendix to Subsec. 1273.2.c) CERTIFICATION This is to certify that: (1) the packing credit rediscounted with the Central Bank covering the export bills listed below which are being submitted for rediscounting had been liquidated by the exporters concerned and that the corresponding loan values had been fully settled with the Central Bank; and (2) the amounts corresponding to partial negotiations of export L/Cs, had been applied in partial payment of the exporters' packing credit advances and the proportionate loan values thereof had been remitted to the Central Bank. Amount Packing Credit DLC of Loan with CB LC/SO/PO Appl. Remittance Exporter/Borrower Draft Date Amount No. No. Date Amount _______________________________ (Name of Bank) By: _______________ _______________ (Signature) (Title) _______________ _______________ (Signature) (Title) APPENDIX 15 MAXIMUM MATURITY OF LOANS FROM THE CENTRAL BANK TO INSTITUTIONAL BORROWERS (Appendix to Subsec. 1273.3.e) I. Farm Crops A. 150 days White Corn B. 180 days Sorghum Yellow Corn Soybean C. 210 days Citrus * Rice *** Mango * D. 240 days Atis * Chico E. 270 days Cotton F. 360 days Abaca ** Ginger Banana ** Papaya * Cassava Pineapple * Coconut * Sugar * Coffee * II. Poultry, Fish and Livestock A. 90 days Poultry: Broiler B. 120 days Fish C. 180 days Poultry: Duck raising (Production, day old 4 mos.) Livestock: Rabbit D. 210 days Livestock: Goats E. 270 days Poultry. Duck raising (Duck egg Production 4 mos. old stock) Livestock: Hog Raising Fattening (2 mos. old stock) F. 360 days Poultry: Egg production (ready to lay pullets) Livestock: Cara beef (yearling stock) Cattle Raising Cattle fattening 270-360 days (1 1- years old stock) Hog Raising fattening (2 mos. old stock) III. Vegetables A. 90 days Mustard Pechay B. 130 days Sweet green corn C. 150 days Cabbage Giant Pepper Carrot Sweet potato Cauliflower D. 180 days Beans (red, Baguio, Bongo Navy) Okra Cowpea Peanut Cucumber Peas Garlic Sitao Irish potato Melon E. 210 days Ampalaya Tomato Eggplant F. 270 days Onion G. 300 days Lima (patani) Squash Seguidillas Upo H. 360 days Chayote Footnotes * Financing starts on established and fruit-bearing age crop ** Financing starts six months after planting *** Maximum maturity of loans to finance non-high yielding, traditional varieties 270 days APPENDIX 17 SAMPLES OF STANDARDIZED INSTRUMENTS EVIDENCING DEPOSIT SUBSTITUTE LIABILITIES (APPENDIX to Subsec. 1281.D) Serial No. ________________ Original ____________________________ (Name of Intermediary) PROMISSORY NOTE Issue Date : _______, 19 _____ Maturity Date : _______, 19 _____ FOR PESOS _______________________ (P_______) RECEIVED, ____________ (Present Value/Account Number of Payee) (Name of Issuer/Maker) promises to pay _________________ or order, the sum of PESOS _______________ (Name/Account Number of Payee) (Maturity Value/Principal & Interest) (P_____), subject to the terms and conditions on the reverse side hereof. _________________________ Duly Authorized Officer NOT INSURED WITH THE PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) TERMS AND CONDITIONS OF A PROMISSORY NOTE 1. Computation of Yield Interest is hereby stipulated/computed at ____% per annum, compounded ( ) monthly ( ) quarterly ( ) semi-annually ( ) others. 2. No Pretermination This promissory note shall not be honored or paid by the issuer/maker before the maturity date indicated on the face hereof. 3. Liquidated Damages In case of default, issuer/maker shall pay, in addition to stipulated interest, liquidated damages of (amount or %) , plus attorney's fees of (amount or %) and costs of collection in case of suit. 4. Renewal ( ) No automatic renewal. ( ) Automatic renewal under the following terms: ___________________________ ___________________________ 5. Collateral/Delivery ( ) No collateral ( ) Collateralized/secured by (describe collateral) ( ) Physical delivered to payee ( ) Evidenced by Custodian Receipt No. _____ dated _____ issued by __. ( ) Collateralized/secured by (fraction or %) __ share of (described collateral) as evidenced by Custodian Receipt No. _____ dated _____ issued by _________. 6. Substitution of Securities ( ) No acceptable to payee ( ) Acceptable to payee, however, actual substitution shall be with prior written consent of payee. 7. Separate Stipulations ( ) This Agreement is subject to the terms and conditions of (described document) dated _____, executed by (Name of party/ies) and made in integral part hereof. Repurchase Agreement TERMS AND CONDITIONS OF A REPURCHASE AGREEMENT 1. Computation of Yield Yield is hereby stipulated/computed at ___% per annum, compounded ( ) monthly ( ) quarterly ( ) semi-annually ( ) others. 2. No Pretermination Vendor shall not repurchase subject security/ies before the repurchase date stipulated on the face of this document. 3. Liquidated Damages In case of default, issuer/maker shall pay, in addition to stipulated interest, liquidated damages of (amount or %) , plus attorney's fees of (amount or %) and costs of collection in case of suit. 4. Renewal ( ) No automatic renewal. ( ) Automatic renewal under the following terms: ___________________________ ___________________________ 5. Collateral/Delivery ( ) Physical delivered to payee ( ) Evidenced by Custodian Receipt No. _____ dated _____ issued by ____. 6. Substitution of Securities ( ) No acceptable to payee ( ) Acceptable to payee, however, actual substitution shall be with prior written consent of payee. 7. Separate Stipulations ( ) This Agreement is subject to the terms and conditions of (describe document) dated _____, executed by (name of party/ies) and made in integral part hereof. Certificate of Assignment with Recourse TERMS AND CONDITIONS OF CERTIFICATE OF ASSIGNMENT WITH RECOURSE 1. No Pretermination Assignor shall not pay nor repurchase subject security/ies before the maturity date thereof. 2 Liquidated Damages In case of default, issuer/maker shall pay, in addition to stipulated interest, liquidated damages of (amount or %) , plus attorney's fees of (amount or %) and costs of collection in case of suit. 3 Delivery/ Custody of Securities ( ) Physical delivered to payee ( ) Evidenced by Custodian Receipt No. _____ dated _____ issued by ____. 4. Separate Stipulations ( ) This Agreement is subject to the terms and conditions of (describe document) dated _____, executed by (Name of party/ies) and made in integral part hereof. Certificate of Assignment with Recourse TERMS AND CONDITIONS OF CERTIFICATE OF ASSIGNMENT WITH RECOURSE 1. No Pretermination Assignor shall not pay nor repurchase subject security/ies before the maturity date thereof. 2 Liquidated Damages In case of default, issuer/maker shall pay, in addition to stipulated interest, liquidated damages of __ (amount or %)__ , plus attorney's fees of __ (amount or %)__ and costs of collection in case of suit. 3 Delivery/ Custody of Securities ( ) Physical delivered to payee ( ) Evidenced by Custodian Receipt No. _____ dated _____ issued by ____. 4. Separate Stipulations ( ) This Agreement is subject to the terms and conditions of __ (describe document)__ dated _____, executed by __ (Name of party/ies)__ and made in integral part hereof. Certificate of Participation with Recourse TERMS AND CONDITIONS OF CERTIFICATE OF PARTICIPATION WITH RECOURSE 1. No Pretermination Issuer shall not pay nor repurchase the participation before the maturity date of subject security(ies). 2 Liquidated Damages In case of default, issuer/maker shall pay, in addition to stipulated interest, liquidated damages of __ (amount or %)__ , plus attorney's fees of __ (amount or %)__ and costs of collection in case of suit. 3 Delivery/ Custody of Securities ( ) Physical delivered to payee ( ) Evidenced by Custodian Receipt No. _____ dated _____ issued by ____. 4. Separate Stipulations ( ) This Agreement is subject to the terms and conditions of __ (describe document)__ dated _____, executed by __ (Name of party/ies)__ and made in integral part hereof. Certificate of Participation with Recourse TERMS AND CONDITIONS OF CERTIFICATE OF PARTICIPATION WITH RECOURSE 1. No Pretermination Issuer shall not pay nor repurchase the participation before the maturity date of subject security (ies). 2 Liquidated Damages In case of default, issuer/maker shall pay, in addition to stipulated interest, liquidated damages of __ (amount or %)__ , plus attorney's fees of __ (amount or %)__ and costs of collection in case of suit. 3 Delivery/ Custody of Securities ( ) Physical delivered to payee ( ) Evidenced by Custodian Receipt No. _____ dated _____ issued by ____. 4. Separate Stipulations ( ) This Agreement is subject to the terms and conditions of __ (describe document)__ dated _____, executed by __ (Name of party/ies)__ and made in integral part hereof. APPENDIX 18 NEW RULES ON REGISTRATION OF SHORT TERM COMMERCIAL PAPERS (Appendix to Sec. 1293) Pursuant to Presidential Decree No. 678, as amended by Presidential Decree No. 1798, and other existing applicable laws, the Commission hereby promulgates the following new Rules and Regulations governing short term commercial papers, in the interest of full disclosure and protection of investors and lenders in accordance with the monetary and credit policies of the Central Bank. SECTION 1. Scope . These Rules and Regulations shall apply to short term commercial papers issued by corporations. SECTION 2. Definition . For the purpose of these Rules, the following definitions shall apply: (a) Commercial paper is an evidence of indebtedness of any corporation to any person or entity with a maturity of three hundred sixty-five (365) days or less. (b) Interbank loan transactions shall refer to borrowings between and among banks and non-bank financial intermediaries duly authorized to perform quasi-banking functions. (c) Issue means creation of a commercial paper and its actual or constructive delivery to the payee. SECTION 3. Registration of Commercial Papers . Any corporation desiring to issue commercial paper shall apply for registration with, and submit to, the Commission the following: (a) Ordinary Registration (1) Sworn Registration Statement in the prescribed form; (2) Board resolution signed by majority of its members (a) authorizing the issue of commercial paper, (b) indicating the aggregate amount to be applied for, (c) providing that the registration statement shall be signed by the principal executive officer, the principal operating officer, the principal financial officer, the comptroller or principal accounting officer or persons performing similar functions, and (d) designating at least two senior officers with a rank of vice-president or higher, or their equivalent, to sign the commercial paper instruments to be issued; (3) The latest audited financial statements; and should the same be as of a date more than three (3) months prior to the filing of the registration statement, an unaudited financial statement as of the end of the immediately preceding month; Provided, however , That such unaudited financial statement shall be certified under oath by the accountant and the senior financial officer of the applicant duly authorized for the purpose and substituted with an audited financial statement within one hundred twenty (120) days after the end of the applicants fiscal year. (4) Schedules based on sub-section (3) above in the prescribed form. (5) A committed credit line agreement with a bank, or any financial institution which may be qualified subsequently by the Central Bank, earmarked specifically for repayment of aggregate outstanding commercial paper issues on a pro rata basis, with the following features: (i) A firm irrevocable commitment to make available funds to cover at least 20% of the aggregate commercial papers outstanding at any time: Provided , That if the commitment is extended by a group there shall be a lead bank or any financial institution which may be qualified subsequently by the Central Bank acting for the group; (ii) The commitment shall be effective for as long as the issues are outstanding and may be renewed by the bank or any financial institution which may be qualified subsequently by the Central Bank; (iii) The request for drawdown shall be addressed to the bank or any financial institution which may be qualified subsequently by the Central Bank, which request shall be duly signed by a member of the board of directors and a senior financial officer of the commercial paper issuer duly authorized for the purpose by an appropriate board resolution which shall also provide for the designation of the alternate signatories (likewise a member of the board of directors and a senior financial officer); (iv) A provision that availments shall be allowed only for repayment of commercial papers which are due and payable in accordance with the terms of the commercial paper; (6) A selling agreement for the commercial paper issues with an expanded commercial bank or an investment house, or any financial institution which may be qualified subsequently by the Central Bank, with minimum conditions that the selling agent, among others, shall be responsible for ensuring that the issuer observes the provisions of these rules pertaining to the use of proceeds of the committed credit line and, with the issuer, shall be jointly responsible for complying with all reportorial requirements of the Commission and the Central Bank in connection with the commercial paper issue, it being understood that the primary responsibility for the submission of the report to said regulatory agencies is upon the selling agent: Provided, however , That if the commercial paper issuer is unable to provide the information necessary to meet such reportorial requirements, the selling agent shall, not later than two (2) working days prior to the date when the report is due, notify the Commission of such inability on the part of the issuer: Provided, finally , That if the selling agreement is with a group, composed of expanded commercial banks and/or investment houses or any financial institutions which may be qualified subsequently by the Central Bank, there shall be a syndicate manager acting and responsible for the group. (7) Income statements for the immediate past three (3) fiscal years audited by an independent certified public accountant: Provided , That if the applicant has been in operation for less than three years, it shall submit income statements for such number of years that it has been in operation. (8) A printed copy of a preliminary prospectus approved by the applicant's Board of Directors which, among others, shall contain the following: (i) A statement printed in red on the left hand margin of the front page of the following tenor: "A registration statement relating to these short term commercial papers has been filed with, but has not yet been approved by, the Securities and Exchange Commission. Information contained herein is subject to completion or amendment. These short term commercial papers may not be sold nor may offer to buy be accepted prior to the time the registration statement is approved. This preliminary prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these commercial papers in the Philippines as such offer, solicitation or sale is prohibited prior to registration under the Securities Act, as amended by P.D. No. 678 and P.D. No. 1798." (ii) Aggregate maximum amount applied for, stated on the front page of the prospectus; (iii) Description and nature of the applicant's business; (iv) Intended use of proceeds; (v) The nature of the firm, irrevocable and committed credit line, the amount of the line which shall be at least 20% of the aggregate outstanding commercial paper issues (proceeds of which shall be allocated on a pro rata basis to the aggregate outstanding commercial paper issue regardless of the order of their maturities), and the manner of availment as stipulated in the credit line agreement between the bank and the issuer; (vi) The provision in the selling agreement naming the selling agent and the responsibilities of the selling agent in connection with, among others, the use by the issuer of the proceeds of the bank committed credit line and the reportorial requirements under these rules; LLjur (vii) Other obligations of the commercial paper issuer classified by maturities maturing within six (6) months; from six (6) months to one (1) year, over one (1) year, and past due amounts); (viii) Encumbered assets; (ix) Directors, officers, and stockholders owning 2% or more of the total subscribed stock of the corporation, indicating any advance to said directors, officers and stockholders; (x) List of entities where it owns more than 33-1/3% of the total equity; as well as borrowings from and advances to said entities; (xi) Financial statements for the immediate past three (3) fiscal years audited by an independent certified public accountant: Provided , That if the applicant has been in operation for less than three years, it shall submit financial statements for such number of years that it has been in operation. (b) Special Registration In the case of special registration provided for under Section 10 hereof, the following shall, in addition to the immediately preceding requirements, be prepared and submitted by the selling agent on behalf of the applicant: (1) Projected annual cash flow statement as of the date of filing presented on a quarterly basis supported by schedules on actual maturity patterns of existing receivables and liabilities (under six (6) months; six (6) months to one (1) year; over one (1) year and past due amounts) and inventory turnover as of the end of the month prior to the filing of the registration statement; and (2) Complementary financial ratios for each of the immediate past three (3) fiscal years: (i) Ratio of (a) the total of cash on hand, marketable securities, current receivables to (b) the total of current liabilities; (ii) Debt to equity ratio, with debt referring to all kinds of indebtedness including guarantees; (iii) Ratio of (a) net income after taxes to (b) net worth; (iv) Net profits to sales ratio; and (v) Such other financial indicators as may be prescribed by the Commission. These additional data shall likewise be incorporated in the prospectus. (c) The Commission may, whenever it deems necessary, impose other requirements in addition to those enumerated in subsections (a) and/or (b) above. SECTION 4. Commercial Papers Exempt Per se . The following specific debt instruments are exempt per se from the provisions of these Rules: (a) Evidence of indebtedness arising from interbank loan transactions; (b) Evidence of indebtedness issued by the national and local governments; (c) Evidence of indebtedness issued to the Central Bank under its open market and/or rediscounting operations; (d) Evidence of indebtedness issued by the Central Bank of the Philippines, Philippine National Bank, Development Bank of the Philippines, Land Bank of the Philippines, Government Service Insurance System and the Social Security System; (e) Evidence of indebtedness issued to the following primary institutional lenders: banks, non-bank financial intermediaries authorized to engage in quasi-banking functions, financing companies, investment companies, non-stock savings and loan associations, building and loan associations, venture capital corporations, special purpose corporations referred to in Central Bank Monetary Board Res. No. 1051 dated June 19, 1981, insurance companies, government financial institutions and pawnshops; provided all such evidences of indebtedness shall be held on to maturity and shall neither be negotiated nor assigned to any one other than the Central Bank, and the Development Bank of the Philippines with respect to private development banks in connection with their rediscounting privileges; (f) Evidence of indebtedness the total outstanding amount of which does not exceed Five Million Pesos (P5,000,000.00) and issued to not more than ten (10) primary lenders other than those mentioned in subsection (e) above, which evidence of indebtedness shall be payable to a specific person and not to bearer and shall neither be negotiated nor assigned but held on to maturity; (g) Evidence of indebtedness denominated in foreign currencies; and (h) Evidence of indebtedness arising from bona fide sale of goods or property. SECTION 5. Other Commercial Papers Exempt from Registration . Commercial papers issued by any financial intermediary authorized by the Central Bank to engage in quasi-banking functions shall be exempt from registration under Section 3, but shall be subject to payment of the exemption fee as provided under Section 15 and to the reportorial requirements under Section 17, all under these Rules. SECTION 6. Prohibition . No commercial paper except of a class exempt under Sections 4 and 5 hereof, shall be issued unless such commercial paper shall have been registered under these Rules: Provided , That no registered commercial paper issuer may issue commercial paper exempt per se under Section 4 (f) hereof. SECTION 7. Compliance with Central Bank Quasi-Banking Requirements . Nothing in these Rules shall be construed as an exemption from or a waiver of the applicable Central Bank rules/regulations or circulars governing the performance of quasi-banking functions or financial intermediaries duly authorized to engage in quasi-banking activities. Any violation of said Central Bank rules/regulations or circulars shall be considered a violation of these rules and regulations. SECTION 8. Action on Application for Registration . (a) Within sixty (60) days after receipt of the complete application for registration, the Commission shall act upon the application and shall in the appropriate case grant the applicant a Certificate of Registration and Authority to Issue Commercial Papers. (b) The Commission shall return any application for registration, in cases where the requirement of applicable laws and regulations governing the issuance of commercial papers have not been complied with, or for reasons which shall be so stated. SECTION 9. Ordinary Registration . If the value of commercial papers applied for, when added to the total outstanding liabilities of the applicant, does not exceed three hundred percent (300%) of networth based on the financial statements referred to under Section 3(a) (3), the commercial papers shall be registered upon compliance with the requirements specified in Section 3(a) hereof. The same principle shall apply in the case of renewal of the Authority to Issue Commercial Paper. SECTION 10. Special Registration . If the value of commercial paper applied for exceeds three hundred per cent (300%) of networth as contemplated in the preceding section, it shall be subject to compliance with the requirement under Section 3(b) hereof. SECTION 11. Validity Period of the Authority to Issue Commercial Paper . The authority to issue commercial paper shall be valid for a period of three hundred sixty five (365) days which shall be indicated in the Authority to Issue Commercial Paper, provided that renewal thereof, upon application filed at least forty five (45) days prior to its expiry date, may be for a period shorter than three hundred sixty-five (365) days. SECTION 12. Conditions of the Authority to Issue Commercial Paper . (a) In the event that the commercial paper issuer fails to pay in full any commercial paper upon demand at stated maturity date, the Authority to Issue Commercial Paper is automatically suspended. The selling agent shall, within the next working day, notify the Commission thereof and the Commission shall forthwith issue a formal Cease and Desist Order enjoining both the issuer and the selling agent from further issuing or selling commercial papers. (b) Whenever necessary to implement the monetary and credit policies promulgated from time to time by the Monetary Board of the Central Bank, the Commission may suspend the Authority to Issue Commercial Paper, or reduce the authorized amount thereunder, or schedule the maturities of the registered commercial paper to be issued. SECTION 13. Basic Features of Registered Commercial Papers . (a) All registered commercial paper instruments shall have a standard format, serially pre-numbered and denominated. The instrument shall state, among others, the debt ceiling of the registrant and a notice that information about the registrant submitted in connection with the registration and other reportorial requirements from the issuer is available at the Commission and open to public inspection and that the issuer is not authorized by the Central Bank to perform quasi-banking functions. (b) A specimen of the proposed commercial paper instrument shall be submitted to the Commission for approval of the text thereof. (c) The approved instrument shall be printed by the Central Bank Security Printing Plant pursuant to a prior authorization from the Commission, and shall be released by the Commission to the issuer. SECTION 14. Minimum Maturity Value . The maturity value of each registered commercial paper instrument shall not be lower than Three Hundred Thousand Pesos (P300,000). SECTION 15. Fees . Every registrant shall pay the following fees: (a) Upon application for registration, and for renewals thereof, a filing fee of not more than 1/50th of 1% based on the total commercial paper proposed to be issued. (b) For issuers of commercial paper exempt under Section 5 hereof, an annual exemption fee of P10,000. SECTION 16. Notice of Availment . Whenever the credit line is drawn upon, the selling agent and/or issuer shall within two (2) working days immediately following the date of drawdown notify the Commission of such event indicating the amount availed of and the total availment as of that given time. SECTION 17. Periodic Reports . (a) Issuers of registered commercial papers and those exempt under Section 5 hereof shall submit to the Commission and the Central Bank the following reports in the prescribed form: (1) Monthly reports on commercial papers outstanding as at the end of each month, to be submitted within ten (10) working days following the end of the reference month; (2) Quarterly reports on commercial paper transactions accompanied by an interim quarterly financial statement to be submitted within thirty (30) calendar days following the end of the reference quarter; and (3) For issuers whose application for registration was under Section 10 hereof, the projected quarterly cash flow statements with the corresponding quarter's actual figure to be submitted within ten (10) working days following the end of the reference quarter; (b) These periodic reports shall be signed under oath by the corporate officers authorized pursuant to a board resolution previously filed with the Commission; (c) Issuers whose offices are located in the provinces may submit their reports to the nearest extension offices of the Commission. SECTION 18. Administrative Sanctions . If the Commission finds that there is a violation of any of these Rules and Regulations and implementing circulars or that any issuer, in a registration statement and its supporting papers, as well as in the periodic reports required to be filed with the Commission and the Central Bank, has made any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or refuses to permit any lawful examination into its corporate affairs, the Commission shall, in its discretion, impose any or all of the following sanctions: (a) Suspension, or revocation, after proper notice and hearing of the Certificate of Registration and Authority to Issue Commercial Paper; (b) A fine in accordance with the guidelines that the Commission shall issue from time to time: Provided, however , That such fine shall in no case be less than P200 nor more than P500,000 for each violation plus not more than P500 for each day of continuing violation. The schedule issued by the Commission shall initially be the guideline on the scale of fines. (c) Other penalties within the power of the Commission under existing laws; and (d) The filing of criminal charges against the individuals responsible for the violation. SECTION 19. Cease and Desist Order . The Commission may, on its own motion or upon verified complaint by an aggrieved party, issue a Cease and Desist Order ex-parte if the violation(s) mentioned in Section 18 may cause great or irreparable injury to the investing public or may amount to palpable fraud or violation of the disclosure requirements of the Securities Act and of these Rules and Regulations. The issuance of such Cease and Desist Order automatically suspends the Authority to Issue Commercial Paper. Such Cease and Desist Order shall be confidential in nature until after the imposition of the sanctions mentioned in Section 18 shall have become final and executory. Immediately upon the issuance of an ex-parte Cease and Desist Order, the Commission shall notify the parties involved and schedule a hearing on whether to lift such order or to impose the administrative sanctions provided for in Section 18 not later than Fifteen (15) days after receipt of notice. SECTION 20. Repealing Clause . These Rules and Regulations supersede the Rules on Registration of Commercial Papers dated December 10, 1975, and all the amendments to said Rules. All other rules, regulations, orders, memoranda circular of the Commission which are inconsistent herewith are likewise hereby repealed or modified accordingly. SECTION 21. Transitory Provision . Any authority to Issue Commercial Paper valid and subsisting as of the date of the effectivity of these Rules and Regulations, shall remain valid and upon its expiration may, at the discretion of the Commission and subject to such conditions as it may impose, be renewed on the basis of the Rules on Registration of Commercial Papers dated December 10, 1975 for an aggregate period not exceeding fifteen (15) months from its expiry date. SECTION 22. Effectivity . These Rules and Regulations shall take effect on December 11, 1981. Mandaluyong, Metro-Manila, Philippines, December 8, 1981. (SGD.) MANUEL G. ABELLO Chairman Securities and Exchange Commission APPROVED: (SGD.) ALFREDO PIO DE RODA, JR. Acting Minister Ministry of Finance (SGD.) JAIME C. LAYA Chairman Monetary Board of the Central Bank of the Philippines APPENDIX 19 SEC RULES ON REGISTRATION OF LONG-TERM COMMERCIAL PAPERS AND BONDS (Appendix to Sec. 1293) Pursuant to Presidential Decree No. 678 and existing laws, the Securities and Exchange Commission hereby promulgates the following rules on close-end registration of commercial papers with face maturities of 366 days or more and bonds, referred to in Section 3(d) of the Rules on Registration of Commercial Papers dated December 10, 1975, in the interest of full disclosure and protection of investors and lenders. SECTION 1. Scope . These rules shall cover the following corporations issuing commercial papers with face maturities of 366 days or more and bonds: (1) Financial intermediaries, banks and non-banks performing quasi-banking functions; (2) Other corporate issuers of long-term commercial papers and bonds the aggregate amount to be issued or the outstanding issue of which is P1 million or more: (i) Which will be negotiated to any number of persons; or (ii) Which will be primarily issued to twenty (20) or more lenders/investors. No commercial papers with face maturities of 366 days or more and bonds shall be issued or negotiated unless the same have been registered or are exempt pursuant to these rules. It is understood that any corporation performing quasi-banking functions shall, in addition to the registration requirement of these rules, be subject to the provisions of existing regulations governing the securing of a certificate of authority to perform quasi-banking functions. Regulations prescribing the registration of commercial papers by issuers not otherwise covered by these rules shall be promulgated at such time as the Commission deems necessary and appropriate in the public interest. SECTION 2. Definitions . For the purpose of these rules, unless the context otherwise indicates, the following definition of terms is hereby adopted: (a) Commercial Paper is an instrument evidencing indebtedness of any person or entity, specifically banks and non-banks performing quasi-banking functions, which is issued, endorsed, sold, transferred or in any manner conveyed to another person or entity, either with or without recourse. Examples of commercial papers are promissory notes, re-purchase agreements, and/or similar instruments. (b) Issue means creation of real or contingent liability relative to commercial papers. It includes the roll-overs and/or extension of maturing commercial papers. (c) Negotiation is the transfer including the assignment of an instrument whether negotiable or non-negotiable or of any underlying rights/interests thereof with the necessary formality so as to constitute the transferee a holder or payee thereof. (d) Affiliate is a concern linked directly or indirectly to another by means of: (1) Ownership, control and power to vote, of 10% or more of the outstanding voting securities; (2) Interlocking directorship/officership; (3) Common major stockholders; i.e., owning 10% or more of the outstanding voting securities; (4) Management contract or any arrangement granting power to direct or cause the direction of management and policies; (5) Voting trustee holding 10% or more of the outstanding voting securities; (6) Permanent proxy constituting 10% or more of the outstanding voting securities; (e) Subsidiary means a company 50% or more of the outstanding voting securities of which are directly or indirectly owned, controlled, or held with power to vote, by another. SECTION 3. Registration (a) Requirements The applicant for the registration of commercial papers with face maturities of 366 days or more and bonds shall submit the following documents in quintuplicate: 1. Registration Statement, in the prescribed form and with the prescribed annexes thereto. (a) LT 10 Commercial and industrial Corporations (b) LT 20 (A) Banks authorized to engage in quasi-banking functions (c) LT 20 (B) Banks not authorized to engage in quasi-banking functions (d) LT 30 (A) Non-bank financial intermediaries authorized to engage in quasi-banking functions (e) LT 30 (B) Non-bank financial corporations not authorized to engage in quasi-banking functions (f) LT 40 Exempt issuers 2. Resolution approved by the stockholders owning at least a majority of the subscribed capital stock certified under oath by the corporate secretary, authorizing the issuance and creation of said commercial papers and bonds, respectively; 3. Immediately preceding three (3) years financial statements certified by an independent Certified Public Accountant; 4. A cash flow and projected balance sheet/income statement certified under oath by the Treasurer or any Senior Financial Officer covering the period during which said commercial papers and bonds shall be outstanding; 5. Sample form of the debt instruments in accordance with SEC Memorandum Circular No. 5, Commercial Paper Series, dated June 10, 1976; 6. A copy of any prospectus, brochure, advertisement, letter or communication which the applicant intends to circulate in connection with the issue; 7. Certificate of Creation of bonded indebtedness as approved by the Commission pursuant to Section 17 of the Corporation Law; 8. Trust Indenture, the terms and conditions of which shall be on an arm's length basis executed by and between the applicant and a qualified trust corporation which is neither an affiliate nor a subsidiary of the applicant; 9. A schedule of the assets to be used as collateral certified under oath by the Treasurer or any Senior Financial Officer of the applicant, in case of mortgage or collateral bonds; 10. In case of financial intermediaries not authorized to engage in quasi-banking functions, a board resolution to the effect that the applicant will not engage in such activity as defined under existing regulations. Compliance with Nos. 7,8,9 shall only be required of issuers of Bonded Indebtedness: Provided , That issuers of long-term commercial papers which are secured either by mortgage or pledge of real and personal properties shall likewise comply with requirement No. 9. (b) The Commission may waive the need for the disclosure of any portion of a material instrument and/or contract if the applicant requests and the Commission agrees that disclosure of such portion would impair the value of the instrument or contract and would not be necessary for the protection of lenders/investors. (c) The acceptance of the registration application is not a guarantee that the Commission has evaluated the registration papers. SECTION 4. End Registration . Registration of commercial papers with face maturities of 366 days or more and bonds as herein required shall be a close-end process. This means that the principal amount of any outstanding issue in any manner re-acquired, pursuant to the terms and conditions of the issue cannot be resold or reissued but has to be retired and deducted from the aggregate amount which the issuer is authorized to borrow under the registration statement filed by such issuer. Nothing herein shall authorize financial intermediaries engaged in quasi-banking functions to preterminate their commercial paper issue in violation of applicable Central Bank regulations. SECTION 5. Notice and Hearing . (a) For applicants which have commercial papers with maturities of 366 days or more and bonds outstanding prior to the effectivity of these rules: 1. Upon submission and receipt of the registration statement duly accomplished together with all the required annexes and supporting documents, the Commission shall publish once at the expense of the applicant, such fact of filing in a newspaper of general circulation in the Philippines reciting that a registration statement for the sale of such commercial papers and bonds has been filed with it, and that the said Registration Statement, as well as all the other requisite papers attached; thereto are open to inspection during business hours by interested parties. 2. Seven days after such publication, the Commission shall issue a provisional permit authorizing the sale of such commercial papers and bonds in the Philippines, which shall be valid for a period of 90 days. 3. During this period, the Commission shall review and evaluate the applicant's application. The Commission may, if it finds necessary, call the officers of the applicant to a closed-door conference-hearing. 4. On or before the expiration of the period of 90 days, the Commission shall issue an Order authorizing the sale of said commercial papers and bonds unless it needs additional information or materials in which event, the Commission shall issue its decision not later than 10 days after the submission thereof, beyond the said 90-day period. 5. The applicant shall publish ONCE, the fact that a regular authority has been issued by the Commission in a newspaper of general circulation throughout the Philippines in such size, form and content as prescribed by the Commission. (b) For applicants which do not have any commercial paper with face maturities of 366 days or more and bonds outstanding prior to the effectivity of these rules: 1. The Commission shall issue its decision not later than 90 days after submission of the completed application for registration. In the event the Commission shall require additional information, the Commission's decision shall in no case be issued later than ten (10) days after submission of the additional information beyond the aforesaid 90-day period. 2. During this period, the Commission shall review and evaluate the application. If necessary, the Commission may call the officers of the applicant for a closed-door conference-hearing. 3. After the Commission issues the registration authority, the applicant shall publish notice thereof ONCE in a newspaper of general circulation throughout the Philippines, in such size, form and content as prescribed by the Commission. (c) The Commission shall return any application for registration, if: 1. The requirements of applicable laws and regulations governing the issuance of long term commercial papers and bonds have not been complied with; 2. The issuance of the long term commercial papers and bonds will be in conflict with public interest and national policies; 3. Not all information necessary for a proper evaluation of the worthiness of the long-term commercial papers and bonds have been disclosed in the registration statement; 4. The information disclosed by the applicant in its application for registration is erroneous or may result in a misleading conclusion. SECTION 6. Exemption from Registration . The following need not be registered under these rules: (a) Loans and advances of the Central Bank under its open market and/or redis-counting operations; (b) Long-term commercial papers and bonds issued by the National and Local Governments, Central Bank of the Philippines, Philippine National Bank, Development Bank of the Philippines, Land Bank of the Philippines, Government Service Insurance System, Social Security System; (c) Long-term commercial papers and bonds issued by such other government financial entities as may be determined by the Commission upon the recommendation of the Central Bank; and (d) Commercial papers with face maturities of 366 days or more and bonds issued by corporate issuers other than financial intermediaries, banks or non-banks performing quasi-banking functions, the total amount to be issued or the outstanding amount of which is less than a million or 71 million or more but is neither negotiated to any number of persons, nor primarily issued to twenty (20) or more lenders: Provided, however , That said corporate issuers shall, prior to issuance of its long-term commercial papers and bonds, file an information statement (LT-40) with the Commission: Provided, further , That for purposes of determining exemption under this sub-paragraph, papers of subsidiaries, affiliates, holding companies or any other related companies shall be aggregated and considered as one issue. cdlex SECTION 7. Submission of Inventories . The following inventories as at July 31, August 31 and September 30, 1976 shall be submitted to the Commission not later than the thirtieth day of October 1976: (a) A list of outstanding commercial papers with face maturities of 366 days or more and bonds issued or held by each financial intermediary authorized to engage in quasi-banking functions covered by LT 20(A) and LT 30(A) in the prescribed form and content (CP Form QB 2-3-01). (b) A list of the outstanding commercial papers with face maturities of 366 days or more and bonds issued by corporations covered by LT 10, LT 20(B) and LT 30(B) by accomplishing CP Form 101; CP Form 102. SECTION 8. Periodic Reports . Monthly and quarterly reports in quintuplicate, shall be submitted on or before the 15th day following the end of each month and within thirty (30) days following the end of each quarter, respectively, in the prescribed forms herein indicated, as follows: I. Monthly Reports of long-term commercial papers and bonds outstanding, declared overdue and/or restructured, money serviced where paying agent function is retained and other off-balance sheet items serviced: A. CP Form M-2-3-01 for financial intermediaries engaged in quasi-banking functions covered by LT 20 (A) and LT 30 (A); B. CP Form M-101 or CP Form M-102 for other issuers covered by LT 10, LT 20 (B) and LT 30 (B). II. Quarterly Report signed under oath by the President or any other officer duly authorized to do so by the Board of Directors, specifying any changes in the original registration statement or information statement of the corporations: A. CP Form Q-2-3-01 for financial intermediaries covered by LT 20 (A) and LT 30 (A); B. CP Form Q-1 for all registered issuers covered by LT 10, LT 20 (B) and LT 30 (B); C. CP Form Q-40-1 for all exempt issuers covered by LT 40. The Commission may require the submission off such other pertinent reports or statements it may deem necessary in the interest of the public. SECTION 9. Filing Fees . Every applicant shall pay a minimum fee of P1,000.00 or 1/50th of 1%, whichever is higher, based on the total commercial papers and bonds registered but not to exceed P10,000.00. SECTION 10. Central Bank Supervisory Powers . The Monetary Board shall also have the power of supervision in the enforcement of these rules, concurrent with the Commission and, without prejudice to the provisions of the succeeding paragraph, impose administrative sanctions as circumstances warrant. SECTION 11. Administrative Sanctions . If after due notice and hearing, the Commission finds that there was a wilful intent to submit in-adequate disclosures or to deceive through the filing of inaccurate information in the registration statements and/or the periodic reports, or there is a violation of any of the above regulations, the Commission may subject the violator to any of the following penalties: a) Suspension or revocation of selling authority; b) A fine of not less than P200 for every day the violation persists; c) Other penalties within the power of the Commission under existing laws; and d) The filing of criminal charges against the corporation and its principal officers. SECTION 12. Effectivity . These rules shall take effect on October 15, 1976. Ortigas Avenue, Pasig, Metro-Manila, Philippines. October 15, 1976. APPROVED: (SGD.) ANGEL L. LIMJOCO, JR. Chairman Securities & Exchange Commission (SGD.) G. S. LICAROS Chairman Monetary Board of the Central Bank of the Philippines APPENDIX 20 IMPLEMENTING GUIDELINES OF THE COTTON SUPERVISED CREDIT FINANCING PROGRAM Crop Year 1982-1983 (Appendix to Sec. 1358) I. INTRODUCTION The Philippine imports about 35,000 metric tons or 200,000 bales of cotton worth $40 M annually requiring the expenditures of precious foreign exchange. To save scarce foreign exchange resources and to assure the stable supply of cotton which could be grown profitably in our country, there is a felt need to grow cotton locally as an import substitute. Growing cotton locally will save foreign exchange, increase farm incomes, provide additional employment, reduce the cost of cotton to textile millers and assure the supply of cotton regardless of the foreign exchange reserve position of the country. A commercial-scale cotton-growing program would improve complex problems and would require massive use of resources which would need cooperation and coordination from both government and private sectors. The successful implementation of a program with this magnitude would require a centralized direction, management and supervision. Thus, in December 22, 1973, President Macros signed P.D. No 350 which was later amended by P.D. No. 1063 entrusting the Philippine Cotton Corporation the responsibility of undertaking and coordinating a Cotton Production Program in the country. To ensure the success of the program, the Philippine Cotton Corporation, in cooperation with the agencies of the government and private, is providing credit with the package of technology to the farmers. The Cotton Financing Program is to be administered by the CB-DRBSLA through rural banks, stock savings and loan associations, the Philippine National Bank, the Development Bank of the Philippines, the Land Bank of the Philippines and private commercial banks under the Supervised Credit Program whereby adequate credit and competent technical assistance are timely extended to cotton farmer-borrower. Under this scheme, the farmer-borrowers agree in writing that he will apply improved practices necessary to conserve the land, improve its fertility and increase its production and abide by the approved farm plan and budget jointly prepared by him and the Philippine Cotton Corporation production technician. II. OBJECTIVES A. General . To attain self-sufficiency in cotton within the shortest possible time. B. Specific 1. To increase the production and farm income of farmers. 2. To reduce our foreign exchange expenditures. 3. To generate employment particularly in the rural areas. III. Strategy of Implementation A. Funding . The Philippine Cotton Corporation deposited the amount of P5M with the CB-DRBSLA under a special time deposit to augment the initial deposit made by the National Food and Agriculture Council for cotton financing, which is to be utilized as seed starter fund by the participating financial institutions for granting production loans to cotton farmers. B. "Seed" STD Funding and Procedures 1. The PhilCotton production technicians assist farmer-borrowers in the preparation of their farm plans and budgets. These are submitted to the participating bank together with the other required documents. 2. The participating bank prepares an STD application based on the target areas prepared by the Philippine Cotton Corporation which will be the basis for granting STD's by the CB-DRBSLA. 3. The participating bank submits the STD application to CB-DRBSLA. The application shall be supported by the required number of blank STD certificates, the latest statement of financial condition and other CB requirements. 4. CB-DRBSLA processes and approves the STD application of the participating bank. 5. CB-DRBSLA furnishes CB-DLC two copies of the approved application which shall be the basis of rediscounting of the participating bank concerned. The latter in turn furnishes CB-DLC regional office a copy of subsequent rediscounting of the participating bank. 6. CB-DRBSLA fills up the STD certificates and releases the STD to the participating bank by credit advice or telegraphic transfer to the participating bank's depository bank. 7. The term of the STD shall be ninety (90) days: Provided , That if loans to eligible borrowers are one hundred per cent (100%) funded by STD the term of such STD shall be two hundred ten (210) days. ( Effective December 17, 1984 ) C. Additional STD Funding and Procedures 1. In addition to the provisions on the use of the COTTON LOAN FUND as a starter fund, the CB-DRBSLA shall be authorized to grant additional STDs to participating banks which may be unable to get additional funds for releases to cotton farmers through rediscounting. 2. Initial STDs amounting to 50% of the total credit requirements per hectare of cotton financed shall be issued under this special CSCP. This shall have a term of 90 days. In cases where subsequently, additional STD funding is provided, the initial STD term shall be extended by 120 days. STDs issued in addition to the original releases shall mature 210 days from the date of initial STD. Second and third STD releases shall not exceed 25% of the total credit requirements per hectare per release and shall be made 8 and 12 weeks, respectively, after the first STD release. D. Rediscounting . All eligible papers may be rediscounted with the Central Bank's Department of Loans and Credit (CB-DLC) at such value and rate as may be prescribed by the Central Bank: Provided , That loans to eligible borrowers that are one hundred per cent (100%) funded by STD shall not be rediscountable. ( Effective December 17, 1984 ) 1. The participating bank rediscounts the promissory note with CB-DLC submitting with the rediscounting schedule a copy of borrowers application and promissory note and farm plan and budget. 2. Upon approval of the participating bank's application, CB-DLC automatically credits 50% of the rediscounting proceeds to the participating bank's STD account with CB-DRBSLA and the remaining 50% to the participating bank's depository bank. The participating banks are notified by telegram. E. Policies and Procedures 1. Project Areas The project areas shall be those determined by the Philippine Cotton Corporation as suitable for cotton production. These include the following areas and other areas/provinces which will be officially announced by PhilCotton from time to time: Area I Ilocos Norte, Ilocos Sur, Abra Area II La Union, Pangasinan, Zambales Area III Cagayan, Kalinga-Apayao Area IV Isabela, Nueva Vizcaya, Quirino Area V Tarlac, Nueva Ecija, Pampanga, Bulacan Area VI Rizal, Laguna, Batangas, Cavite, Mindoro Area VII Negros Occidental, Iloilo, Antique, Capiz, Aklan Area VIII South Cotabato, Sultan Kudarat, Maguindanao Area IX Cebu, Negros Oriental, Misamis Oriental, Bukidnon 2. Eligible Borrowers . a. Only bona-fide individual farmers, partnerships, associations and cooperatives, as recommended/accredited by the PCC in coordination with the lending bank in designated project areas who are interested in growing cotton are qualified under the program. b. Farmers with past dues on M-99 loans up to P3,000 may qualify for a cotton loan. It is left to the discretion of the manager to accept the loan application of farmer-borrowers with past dues of more than P3,000 considering his past experience and evaluation of the loan application. 3. Requirements . The following requisite documents as attachments to a farmer-borrower's loan application shall be submitted to the bank. Cotton technicians shall ensure the completion and thoroughness of said documents to obviate and prevent delays in processing activity. Moreover, participating banks are likewise enjoined to refrain from additional requirements inconsistent with the guidelines. a. Farm plan and budget to be prepared by the farmer with the assistance of the cotton production technicians. b. Certificate of identity of the farmer-borrower signed by the barangay captain or Samahang Nayon President or NFAC identification card. c. The farmer must sign a marketing agreement with PhilCotton. d. Additional requirements such as the farmer's ID picture and residence certificate. e. For agrarian reform beneficiaries, a MAR certificate is required. 4. Loan Per Hectare . The amount of the loan shall be as follows: a. For farmers applying for cotton loans for two (2) hectares or less, maximum amount of P3,000 per hectare shall be granted. b. For farmers applying for cotton loans for more than two (2) hectares, a maximum amount of 4,300 per hectare shall be granted. c. For farmers who may need to purchase sprayers, an additional loan of up to P700 per hectare shall be granted. d. The proceeds of the loan shall be budgeted as shown in the attached farm budget. 5. Loan Releases a. Upon approval of the loan, the entire loan proceeds shall be released and automatically credited to the Special Savings Deposit (SSD) account in the name of the borrower. Thus, SSD shall earn interest at the same rate such borrower has been charged on his loan. ( Effective December 17, 1984 ) b. Loan releases shall be based on the farm plan and budget upon the recommendation of the PhilCotton production technician. 6. Security of the Loan a. For individual farmer-borrowers applying for cotton loans for six hectares or less, a chattel mortgage on the standing crop or deed of assignment of produce shall suffice, in such cases, registration of the chattel mortgage or deed of assignment shall be done by the participating bank. The registration fee shall be for the account of the farmer. b. For areas beyond six hectares per borrower, the manager of participating banks shall have the discretion as to the required collateral and securities consistent with their bank's lending policies and guidelines. 7. Processing of Loan Application a. The participating bank shall begin accepting cotton loan applications effective January and shall process them within one (1) month from date of receipt of complete application forms and requirements and effect provisional approval thereon or certify eligibility of farmer for cotton financing subject to the provisions of the succeeding paragraph. b. Unless otherwise indicated, the final loan approval shall be subject to the repayment of the borrower's outstanding obligations or restructuring of the unpaid portion of the current loan. The matured portion of the restructured loan shall be deducted from the proceeds of the seedcotton sales of the borrower to PhilCotton. However, such deductions shall not exceed 30% of the net proceeds due to the borrower after deducting the cotton loan and interest that may have accrued thereon. 8. Maturity of the loan . All loans shall mature within a period of seven (7) months or 210 days. 9. Interest and Other Charges . Loans shall be subject to a maximum interest equivalent to MRR 90 less 2 percent per annum, inclusive of service and other charges: Provided , That loans that are one hundred per cent (100%) funded by STD shall bear interest of fifteen per cent (15%) per annum, inclusive of all charges, or at such rate as may be prescribed by the Central Bank. ( Effective December 17, 1984 ) 10. SSD Withdrawal and Purchasing of Inputs . a. All cash withdrawals from the SSD must be in accordance with the farm plan and budget. b. Purchase of needed production inputs like seeds, fertilizer, sprayer and chemicals shall be done through the chit system or purchase order. Banks shall be prohibited from specifying the dealer where the inputs will be purchased. Farmers shall be left to choose among the dealers which are accredited. c. Based on the actual needs of the crop, the production technician issues the chit indicating the name of the farmer, effective date of chit input/amount required. The technician issues the participating bank's and dealer's copies to the farmer and retains stub for reference. d. Chits must be validated by bank prior to use. A validated chit is good only for a period of 15 days. Unused chits may, however, be revalidated subject to approval by bank. e. Liquidation of serviced chits shall be accomplished weekly upon dealer's presentation of a summary of serviced chits with the corresponding invoice receipts. f. Before a farmer-borrower can make use of chits he must first have it validated. (1) Farmer takes accomplished chit to the participating banks. (2) The participating bank verifies the schedule of input releases and the corresponding amount to be withdrawn against SSD. (3) Farmer accomplishes withdrawal slip from the SSD. (4) The participating bank stamps its seal on both copies and returns dealer's copy to the farmer. A validated chit is good only for fifteen days. Hence, the farmer-borrower must withdraw his inputs from the accredited dealer within the indicated term. If, however, the farmer fails to get his inputs from the dealer within the specified span of time, he could revalidate his expired chits, subject to the approval of the technician and the participating bank involved. (5) Farmer brings validated chits to an accredited dealer. (6) Dealer issues the input with an invoice receipt indicating clearly the name, quantity and price of the inputs. g. Liquidation of serviced chits is done weekly upon dealer's presentation of a summary of serviced chits with the corresponding invoice receipts. 11. Repayment and Marketing Strategy a. At the start of the cropping season, the PhilCotton guarantees a floor price and market to the farmer-borrowers involved in the cotton financing program. The floor price shall be announced at least two (2) months prior to the start of the planting seasons. b. Farmers shall deliver their produce to PhilCotton collection centers where they will be issued receipts indicating the quantity and value of harvest delivered. c. PhilCotton shall deposit adequate funds for seedcotton purchases with the participating bank at least two (2) weeks before purchasing. d. PhilCotton shall pay the cotton deliveries through the lending bank. e. The lending bank credits the amount to the farmer's account to offset his loan. Any excess amount is given to the farmer. 12. Restructuring . Participating banks shall be allowed to restructure the loans granted under this program in case of force majeure or fortuitous events upon certification by area production technician, duly attested by his area supervisor and subject to verification by the CB agricultural credit supervisors for RBs/SLAs or by the representatives of PNB, DBP, LBP, or the private commercial banks. 13. Guarantee Feature . The Philippine Crop Insurance (PCIC) shall guarantee any loss up to 85% that may be incurred by the RB/SLA as a result of non-payment of loans due to unforeseen circumstances beyond the control of the farmer-borrower under the Agricultural Guarantee Program. The guarantee fee of one per cent (1%) of the amount of production loans granted shall be paid by the banking institution to the PCIC regional office concerned. 14. Monitoring . Participating banks shall accomplish monthly progress report to be submitted to the CB-Department of Rural Banks and Savings and Loan Associations (DRBSLA) and to PhilCotton. A standard supervised credit monitoring form shall be used for this purpose. 15. Evaluation of Farm Projects After the End of the Crop Year . The technician evaluates the projects after the end of the crop season to determine the problems encountered by the farmer-borrowers in order to formulate recommendations/solutions to improve the farmers future farming operations. 16. Saving Consciousness . To instill savings consciousness among cotton borrowers, they shall be encouraged to maintain a portion of the net proceeds of their seedcotton sales in a savings account with the lender bank. FARM BUDGET * (One-Hectare Cotton Farm) FIRST RELEASE (5-21 days before planting) Land preparation (Cash) P400 Seeds 60 P460 SECOND RELEASE (1-7 days before planting) Fertilizers 1 (Chit) 370 Chemicals 2 (Chit) 40 Irrigation fee/rental/gasoline 3 (Chit) 105 Labor 4 (Planting, fertilizing, irrigation) (Cash) 450 965 THIRD RELEASE (7-14 days after emergence) Chemicals (Chit) 160 Labor (spraying, spot weeding, off-bearing) (Cash) 100 260 FOURTH RELEASE (21-35 days after emergence) Fertilizer (Chit) 380 Chemicals (Chit) 270 Irrigation fee/rental/gasoline (Chit) 105 Labor (fertilizing, spraying, irrigating, spot weeding, hilling-up (Cash) 225 980 FIFTH AND SUBSEQUENT RELEASES (61-110 days after emergence) Based on the actual needs of the farmer as certified by the cotton production technician) Chemicals 480 Irrigation fee/rental/gasoline 100 Transportation 5 120 Labor (spraying, spot weeding, irrigating) 200 Harvesting 450 Others 6 125 Contingency 160 P1,635 SUB-TOTAL 4,300 7 LESS: Non-Cash Labor Expense/Contingency 1,300 TOTAL P3,000 8 ======= Footnotes 1. Assuming a 15% increase in prevailing market prices, fertilizer budget is computed for late planting using ammonium sulfate. For early planting and if urea is used, fertilizer is much much lower. 2. Assuming a 15% Crease in prevailing market price. 3. Pump-irrigate. 4. At P15 per day, assuming 122 man-days. 5. At P0.10/kg. within a 30 km. radius assuming a 1.2 ton yield. 6. Include drying, storing, packaging, delivery 7. Maximum amount for farmer cultivating more than two (2) hectares. 8. Maximum amount for farmer cultivating two (2) hectares or less Assuming 80% farmer's equity, 20% hired labor. * Based on Technical Recommendation for CY 1979-80. For farmers who may need to buy sprayers, a maximum amount of P700 will be provided in addition to the farm budget per hectare. APPENDIX 21 FORMAT OF DISCLOSURE STATEMENT ON LOAN/CREDIT TRANSACTION (Appendix to Subsec. 1305.1) ____________________________________ (Business Name of Creditor) DISCLOSURE STATEMENT ON LOAN/CREDIT TRANSACTION (As Required under R.A. 3765, Truth in Lending Act) NAME OF BORROWER _______________________________________________ ADDRESS ___________________________________________________________ 1. LOAN GRANTED (Amount to be financed) P (A) 2. FINANCE CHARGES: Not Deducted Deducted From From Proceeds of Loan a. Interest __% p.a. from ____ to ____ P______ P_______ ( ) Simple ( ) Monthly ( ) Compound ( ) Quarterly ( ) Semi-Annual ( ) Annual b. Non-Interest Charges _______ _______ c. Commitment fee _______ _______ d. Guarantee fee _______ _______ e. Other charges incidental to the extension of credit (Specify): _________________________ _______ _______ _________________________ _______ _______ Total finance charges P P (B) ====== ====== 3. NON-FINANCE CHARGES a. Insurance Premium P______ P______ b. Taxes _______ _______ c. Documentary/Science Stamps _______ _______ d. Notarial fees _______ _______ e. Others (Specify): _______ _______ ________________________ _______ _______ ________________________ _______ _______ Total non-finance charges P P (C) ====== ====== 4. TOTAL DEDUCTIONS FROM PROCEEDS OF LOAN (B plus C) P______ (D) 5. NET PROCEEDS OF LOAN (A less D) P ===== 6. PERCENTAGE OF FINANCE CHARGES TO TOTAL AMOUNT FINANCED (Computed in accordance with Subsec. 1305.2. _______% 7. EFFECTIVE INTEREST RATE _______% p.a. (Method of computation attached) 8. SCHEDULE OF PAYMENT a. Single payment due on ________ P (Date) ====== b. Total Installment Payments Payable in _____________ months/year P (no. of payments) ====== at P _______ each installment. 9. COLLATERAL This loan is wholly/partly secured by (check) real estate chattels government securities UNSECURED 10. ADDITIONAL CHARGES IN CASE CERTAIN STIPULATIONS ARE NOT MET BY THE BORROWER Nature Amount _________________________________ __________________ _________________________________ __________________ _________________________________ __________________ CERTIFIED CORRECT: ____________________________ (Signature of Creditor/Authorized Representative Over Printed Name) ____________________________ Position I ACKNOWLEDGE RECEIPT OF A COPY OF THIS STATEMENT PRIOR TO THE CONSUMMATION OF THE CREDIT TRANSACTION AND THAT I UNDERSTAND AND FULLY AGREE TO THE TERMS AND CONDITIONS THEREOF. ______________________________ (Signature of Borrower over Printed Name) DATE ___________________ NOTICE TO BORROWER: YOU ARE ENTITLED TO A COPY OF THIS PAPER WHICH YOU SHALL SIGN. APPENDIX 22 FORMAT OF ABSTRACT OF "TRUTH IN LENDING ACT" (Republic Act No. 3765) (Appendix to Subsec. 1305.6) SECTION 1. This Act shall be known as the "Truth in Lending Act." SECTION 2. Declaration of Policy . It is hereby declared to be the policy of the State to protect its citizens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy. xxx xxx xxx SECTION 3. As used in this Act, the term . xxx xxx xxx (3) "Finance charge" includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit as the Board may by regulation prescribe. xxx xxx xxx SECTION 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, the following information: (1) the cash price or delivered price of the property or service to be acquired; (2) the amounts, if any, to be credited as down payment and/or trade-in; (3) the difference between the amounts set forth under clauses (1) and (2); (4) The charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit; (5) the total amount to be financed; (6) the finance charge expressed in terms of pesos and centavos; and (7) the percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. xxx xxx xxx SECTION 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount of P100 or in an amount equal to twice the finance charge required by such creditor in connection with such transaction, whichever is the greater, except that such liability shall not exceed P2,000 on any credit transaction. xxx xxx xxx (c) Any person who willfully violates any provision of this Act or any regulation issued thereunder shall be fined by not less than P1,000 or more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both. xxx xxx xxx (e) Any final judgment hereafter rendered in any criminal proceeding under this Act to the effect that a defendant has willfully violated this Act shall be prima facie evidence against such defendant in an action or proceeding brought by any other party against such defendant under this Act as to all matters respecting which said judgment would be an estoppel as between the parties thereto. dctai SECTION 7. This Act shall become effective upon approval. Approved, June 22, 1963. APPENDIX 23 ANNEX A AGREEMENT FOR AN INTERBANK CALL LOAN FUNDS TRANSFER SYSTEM KNOW ALL MEN BY THESE PRESENTS: This Agreement for an Interbank Call Loan Funds Transfer System (the "Agreement") entered by and among the following: The BANGKO SENTRAL NG PILIPINAS, a public corporation duly organized and existing under the laws of the Republic of the Philippines, with principal address at the BSP Building, Roxas Boulevard, Manila, (hereinafter known as the "BSP"); The BANKERS ASSOCIATION OF THE PHILIPPINES, an organization of duly licensed commercial banks in the Philippines, with principal offices at the 11th Floor, Sagittarius Building, Makati, Metro Manila (hereinafter referred to as the "BAP"); and The PHILIPPINE CLEARING HOUSE CORPORATION, an organization duly incorporated under the laws of the Republic of the Philippines, with principal offices at the Ground Floor, 5 Storey Building, Bangko Sentral ng Pilipinas, Manila (hereinafter referred to as the "PCHC"); WITNESSETH THAT: WHEREAS presently, Interbank Call Loans (IBCL/s) are paper-based and transmitted physically by the counterparties to and from each other and to the Bangko Sentral ng Pilipinas (BSP); WHEREAS, the BAP would like to improve the efficiency and productivity of its member banks, as well as other participating financial institutions, reduce the operational risk involved in paper based transactions and transpose IBCL transactions into a fully automated environment; WHEREAS, the BSP, the BAP and the PCHC would like to lay down the parameters and the terms and conditions of such IBCL Funds Transfer System for availment by BAP members, as well as by financial institutions who are non-BAP members; NOW THEREFORE, premises considered, the BSP, the BAP and the PCHC mutually agree one with the other, as follows: 1.0 APPOINTMENT The PCHC is hereby appointed as the exclusive processor, provider and clearing house of the electronic IBCL Funds Transfer System hereafter described (the "System") for all banks/financial institutions participating in the said System. For the purpose of this Agreement, the interbank transactions herein shall refer only to call loans described hereunder and does not include cash withdrawals from the participating institutions' Demand Deposit Accounts (DDAs) at the BSP, Repurchase Agreements, Reverse Repurchase Agreements of Government Securities (GS) with the BSP's Treasury Department. 2.0 CONCEPT AND NATURE OF SERVICES Beginning on the effectivity hereof and the submission of participation letter agreements by each bank and financial institution under Secs. 8.1 and 3.2, all BAP member banks and non member financial institutions will be required to send their IBCL Funds Transfer Instructions (the "Instructions") electronically to the PCHC instead of by physical delivery to the Bangko Sentral as presently practiced. Hard copies of the formats of said loan and repayment instructions are hereto attached as Annexes "A, B, C and D" to this Agreement. All additional data related to the collaterals for secured IBCLs should also be keyed in to the System by participating banks and financial institutions irrespective of the manner of processing their collaterals, whether in the manual stage or in the process of migration to the automation stage. Each participating bank and financial institution will use confidential login IDs and passwords and authentication keys known only to itself to authorize debit and credit Instructions to its DDAs at the BSP. Each such advice when authenticated with the authentication key of a participating bank/financial institution shall be deemed a legally executed Instruction by the transacting parties. The PCHC will authenticate and match transfer Instructions sent by IBCL Borrowers and Lenders. The PCHC does not guarantee nor does it confirm the ownership/existence of collaterals including but not limited to the nominal sale and/or purchase of Government Securities (GS). A summary report of all matched IBCL Funds Transfer Instructions received and authenticated are forwarded by 1:00 o'clock P.M. by the PCHC to the BSP for settlement. At End-Of-Day ("EOD"), the Bangko Sentral will post the appropriate net result of IBCL transactions in the participants' respective DDA and GS accounts. Subject to the provisions of Sec. 4.0, the BSP is not obliged to effect the transfer of funds if there is no sufficient balance in the DDA of the Borrower or Lender, as the case may be, per BSP's books. The PCHC will provide participating banks/financial institutions with a MIPS (Multitransaction Interbank Payment System) IBCL System software (loaded in each participant's Personal Computer-PC) and a User Guide that will allow them to transmit their IBCL Funds Transfer Instructions electronically. The required modems, PCs and communication lines to the central system will be provided by each participating bank/financial institution. 3.0 MATCHING AND AUTHENTICATION Under the System, IBCL Borrowers and Lenders will transact with each other following the IBCL Trading Guidelines and Procedures of MART (Money Market Association of the Philippines), as may be amended from time to time, which are hereto attached as Annex "E" and made an integral part hereof. 3.1 Both the Borrower and the Lender should transmit separate IBCL Funds Transfer Instructions to the PCHC. Each Borrower and Lender shall use its confidential ID and password to activate the System and initiate/authorize its transaction. The electronic debit and credit Instructions (Annexes "A and C" for the Borrower, Annexes "B and D" for the Lender) shall undergo System authentication and matching by the PCHC. Authentication confirms that the instructions contain the proper approvals from authorized officers of the originating institution. The System then compares the Instructions sent by the Borrower and the Lender to ensure that there are no discrepancies in details (amount, interest rate, tenor, maturity date, value date, and collaterals, if any) of the transactions as communicated by the two parties. There shall be three cut off times wherein PCHC will have fifteen minutes to authenticate and match the transactions as follows: Schedules for PCHC to Authenticate and Match: 10:00 10:15 A.M. 11:00 11:15 A.M. 12:15 12:30 P.M. During the authentication and matching process, no Interbank Funds Transfer Instructions may be sent by participating banks/financial institutions to the PCHC. 3.2 Borrowers and Lenders will have the time windows detailed below to verify whether their transaction Instructions have matched or not by accessing the System. Matched transactions shall not be disauthorized. Compensating IBCL transactions may be entered into by the parties to increase or reduce any IBCL transactions already matched by the system. If unmatched, both parties have the first two schedules within which to resend their unmatched Instructions with the correct information. The deadline for sending corrected Instructions by participants is 12:15 P.M. Schedule for Banks to Verify Deals and Correct Unmatched Transactions: 10:15 11:00 A.M. First time window 11:15 12:15 P.M. Final time window The final report of matched transactions for the day will be available for verification from the PCHC System by 12:30 P.M. 3.3. It shall be the responsibility of both Borrower and Lender to access the System to check unmatched transactions and correct these within the specified time windows of correction. Any unmatched transaction after the 12:15 P.M. final cutoff shall be rejected by the system and will be unprocessed. The PCHC has no obligation to prompt transacting parties concerning unmatched transactions. 3.4 The official time which will govern the cut-off times for sending instructions to the PCHC shall be the System time which appears upon login to the System. 4.0 SETTLEMENT The BSP will only act upon the automated summary of IBCL Funds Transfer Instructions signed by an authorized officer/s of the PCHC. Upon receipt, the BSP will post the net results of the summary of IBCL Instructions received from the PCHC immediately so that the updated abstract (DDA Statement) of each bank reflecting the entire day's transactions will be available by 2:00 o'clock P.M. on the business day following the value date of the transaction. Business day for the purpose of this agreement shall be a day on which services are available as provided in Section 5 of this Agreement. If the Borrower or Lender, as the case may be, does not have enough balances in its DDA, the BSP may not effect transfer of funds from the institution to be debited with respect to the transactions affected on a Last In, First Out basis (LIFO). In implementing the LIFO method of unwinding inadequately funded transactions, lending instructions shall be unwound by the BSP ahead of repayment transactions through such LIFO method based on the automated summary provided by the central system to PCHC and confirmed by PCHC's authorized Signers. In case transactions have to be unwound because of the insufficiency of DDA balances of the Borrower or Lender with the BSP, fines and/or penalties will be imposed against the institution to be debited, as the case may be, in accordance with a schedule to be drawn up by the PCHC and the BAP board of directors. 5.0 AVAILABILITY OF SERVICES The services outlined in this Agreement shall be available on all banking days when the Bangko Sentral Accounting Department and the PCHC are open for operations. 5.1. PCHC shall maintain a PC to serve as an input facility. 6.0 TRANSACTION FEES The following shall be assessed by the PCHC against all participating banks and financial institutions: 6.1 IBCL Interbank Funds Transfer Instructions P 50/item/participant 6.2 Escalation IBCL advice fees are fixed up to February 28, 1997. All participating banks and financial institutions shall pay transaction fees according to such rules and regulations and subsequent schedules which shall be promulgated by the PCHC. 7.0 SERVICE AND OTHER CHARGES These may or may not be charged by the Lender against non-BAP members. If not charged, no indication will be made in the appropriate Transfer Instructions. Rates shall be subject to agreement between the transacting parties. 8.0 PARTICIPATION AGREEMENT 8.1 Participating banks who are members of BAP can avail of the services provided by the system by accomplishing the Participation Agreement to avail of the System which is attached hereto as Annex "F" and made an integral part hereof. Participating banks who formally join the System shall be considered bound by the terms and conditions hereof as if they had executed this Agreement. 8.2 Financial institutions who are non-BAP members may avail of the services of the System by filing a Participation Agreement addressed to the PCHC and the BAP subject to the terms and conditions herein stated (Annex "F-1"). Such financial institutions shall be considered bound by the terms and conditions herein after written notification of the approval of the PCHC and the BAP, respectively. Non-BAP members shall be required to pay an admission fee in such sum or sums as the BAP and/or the PCHC will impose before being formally admitted into the System. 9.0 AGENTS AND OBLIGATIONS OF THE PARTIES AND PARTICIPATING BANKS/FINANCIAL INSTITUTIONS: 9.1 The PCHC is responsible for the development/testing/approval of the software for the automated processing of IBCL transactions for both the central system and the participants' front-end IBCL PC Software. The PCHC will provide participating banks and financial institutions with continuing updates on their IBCL PC software. 9.2 The PCHC shall be responsible for the authentication and matching of IBCL Funds Transfer Instructions, for making available the matching results to participants and for summarizing and authenticating in writing all matched IBCL transactions for submission to the BSP as provided herein. 9.3 The BSP shall be responsible for executing matched credit and debit Instructions of all participating banks/financial institutions by EOD of the indicated transaction day conditioned on the existence of EOD balances on the DDAs of each lending/repaying bank, as the case may be, per BSP's books. For this purpose, the participating banks/financial institutions hereby authorize the BSP to execute said credit and debit Instructions based on the authenticated summary reports of the PCHC. The BSP shall also be the institution responsible for unwinding any debit Instructions according to the terms and conditions of this Agreement when such transactions will result in an overdraft condition. 9.4 The BAP, being a mere negotiating and signing agent for participating banks, shall not be made a party to any dispute nor be held answerable for any liability by any transacting parties to IBCL transactions. Its role is to be a catalyst in framing and structuring this Agreement which aims to provide a viable and efficient alternative to paper-based, manual inter-bank call loan transactions. The PCHC and all participating banks/financial institutions who formally join the System and avail of the services provided hereunder shall have no cause of action or right of relief whatsoever against the BAP in connection with, arising out of or in relation to any transactions covered by the Agreement. The PCHC shall not be held responsible for any loss, liability or damage caused by errors and mistakes of participating banks and financial institutions and shall be held free and harmless from claims, suits, costs, and damages attributable thereto. The BSP shall not be made a party to any dispute nor be held answerable for any liability by any transacting party to IBCL transactions. The BSP shall be kept free and harmless by all participating banks and financial institutions for executing and/or effecting settlement instructions or, as may be proper, making and implementing unwinding decisions based on the summary report of the PCHC. 9.5 The BSP shall have the right to rely on the correctness of the authenticated summary of IBCL transactions from the PCHC. 9.6 Each participating bank/financial institution shall be solely responsible for the establishment, confidentiality, safety and security of its password/s for activating the System and initiating IBCL transactions. If it has reason to believe that the confidentiality or security of its login ID's, passwords, and authentication keys has been compromised, each participating bank/financial institution shall take immediate steps to have the same disabled and changed to a new password/s. 9.7 Each participating bank/financial institution shall be legally bound by the IBCL Funds Transfer Instructions, credit and debit as the case may be, which it sends through the System Without need of any other manually prepared confirmation, paper or instrument, provided that the same has been matched and authenticated by the PCHC and provided further that they comply with the terms and conditions set forth herein. 9.8 Each participating bank/financial institution shall be responsible for establishing its own backup/contingency plans to ensure that electronic instructions are sent in the event of failure of its primary hardware. 9.9 Each participating bank/financial institution shall have the responsibility of promptly checking the correctness of the debit and credit entries of the BSP under the system as well as notifying the BSP, the PCHC and its counterparty of any errors so discovered. Participating banks/financial institutions shall not be allowed to question alleged erroneous entries of the BSP after the lapse of 10 banking days after transaction date from the standpoint of the complaining party. 9.10 The PCHC shall implement regular changes in authentication keys and passwords. 9.11 In the event of any generalized problems affecting the central system or communications facilities linking participants to the said central system, the PCHC shall have the prerogative to extend any or all of the authentication, matching and verification schedules specified in Secs. 3.1 and 3.2. 10.0 SETTLEMENT OF DISPUTES 10.1 Due compensation for errors committed by one or both parties shall be as stipulated in Section VII of the MART Trading Guidelines for Interbank Call Loan Transactions. Unresolved disputes involving participating banks will be referred to Voluntary Arbitration. Each party will propose a Voluntary Arbitration Committee by listing 5 names of reputable persons well-versed in the issue in dispute. Thereafter, the proponent to Voluntary Arbitration will strike out one name and the respondent another and so on until only three names are left who will compose the Voluntary Arbitration Committee. 10.2 The decision of the Voluntary Arbitration Committee shall be final and executory in accordance with law. There shall be no appeal unless the decision is tainted with fraud and/or with apparent bias in favor of one party. 10.3 The Voluntary Arbitration law shall apply in a suppletory capacity. 10.4 The Rules of Evidence need not be strictly applied but will be left to the discretion of the Voluntary Arbitration Committee whether they will be resorted to in aid of resolving the dispute. cdlex 11.0 REVISIONS TO AGREEMENT 11.1 Terms and conditions contained in this Agreement shall be subject to the regulations of the BSP and the provisions of existing laws of the Republic of the Philippines. 11.2 Procedures, forms, automation programs, hardware specifications and deadlines referred to herein may be changed or enhanced subject to mutual agreement among the BSP, the PCHC and the BAP in writing. 11.3 Without prejudice to the immediate implementation of this Agreement, the parties herein may establish such further rules and regulations which may be subsequently needed to augment, implement, interpret and govern this Agreement. 12.0 PERIOD OF CONTRACT This contract shall remain valid until February 28, 1997. 13.0 CONFIDENTIALITY PCHC agrees to maintain strict confidentiality of all transactions, data and/or information provided by or pertaining to each participating bank under the System. IN WITNESS WHEREOF, the parties have hereunto set their hands this ______ day of September, 1995 at the City of Makati, Metro Manila. BANGKO SENTRAL BANKERS ASSOCIATION NG PILIPINAS OF THE PHILIPPINES By: By: PHILIPPINE CLEARING HOUSE CORPORATION By: SIGNED IN THE PRESENCE OF: ACKNOWLEDGMENT REPUBLIC OF THE PHILIPPINES ) CITY OF MAKATI ) SS METRO MANILA ) BEFORE ME, a Notary Public in and for the City of Makati, Metro Manila, Philippines, personally appeared: NAME COMMUNITY TAX CERT. NO. DATE & PLACE ISSUED all known to me and by me known to be the same persons who executed the foregoing Agreement for an Interbank Call Loan Funds Transfer System and who acknowledged to me that the same is their voluntary act and deed and the voluntary act and deed of the organizations which they respectively represent. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial seal this _______ day of September, 1995, at the City of Makati, Metro Manila, Philippines. NOTARY PUBLIC Until December 31, 1995 Doc No. ___________: Page No. ___________: Book No. ___________: Series of 1995 APPENDIX 25 SUGGESTED DEBT-TO-EQUITY RATIO OF BORROWING FOREIGN FIRMS (Appendix to Subsec. 1346.2) GROUP A 60:40 (a) Firms registered under the Investment Incentives Act (R.A. No. 5186) and Export Incentives Act (R.A. No. 6135). (b) Firms registered with the Export Processing Zone Authority. (c) Central Bank certified export-oriented firms. (d) Firms entitled to incentives under other laws or Presidential Decrees. (e) 1. Companies or firms engaged in the generation or distribution of energy; 2. Companies or firms engaged in the manufacture or processing of the following essential commodities: a. Animal feeds b. Cement c. Chemicals and fertilizers d. Drugs and medicines e. Flour f. Products which are classified as essential commodities in the list of National Economic and Development Authority including the following: rice, corn, some basic cuts of meat, cooking oil, laundry soap, lumber and plywood, galvanized iron sheets, writing pads and notebooks g. Iron, steel, copper, tin plates and other basic mineral products h. Milk i. Newsprint j. Tires k. Sugar l. Textile and garments. 3. Companies engaged in exploration, development, mining, smelting or refining of coal, oil, iron, copper, gold and other minerals. 4. Companies or firms which are actually engaged in manufacturing activities covered by Defense contracts. cdlex GROUP B 55:45 Firms engaged in other manufacturing activities. GROUP C 50:50 Firms engaged in non-manufacturing activities. APPENDIX 26 SUGGESTED ANNUAL BUILD-UP PROGRAM OF BORROWING FOREIGN FIRMS (Appendix to Subsec. 1346.2) CATEGORY (AS AT THE END AT THE END AT THE END CLASSIFIED IN OF 1ST YEAR OF 2ND YEAR OF 3RD YEAR IN APPENDIX (25) Group A Total 80:20 70:30 60:40 debt-to-equity ratio of Group B Total 75:25 65:35 55:45 debt-to-equity ratio of Group C Total 70:30 60:40 50:50 debt-to-equity ratio of APPENDIX 27 LIST OF POTENTIAL SMALL INDUSTRIES FOR IGLF FINANCING (Appendix to Subsec. 1351.2) Food Products 1. Processed meat and seafoods including canned or packaged, dehydrated 2. Processed fruits and vegetables including juices, canned, dehydrated 3. Coffees processed 4. Species such as processed ginger, pepper, onion, garlic 5. Cereal preparations 6. Starches 7. Processed seaweeds 8. Sauces and salad dressings 9. Processed cheese 10. Confectionery LexLib 11. Cocoa and cocoa preparations such as cocoa butter 12. Chocolate and chocolate preparations 13. Noodles 14. Catsup 15. Baking powder 16. Peanut butter 17. Coco products 18. Fruits and flower wine 19. Castor oil Wood Products 1. Parquet tiles 2. Mouldings 3. Doors and fixtures 4. Shelves and cabinets 5. Caskets 6. Carvings and lattice works 7. Pallets 8. Bamboo products 9. Sandals and shoes 10. Gun stocks 11. Furniture, complete or knocked down parts 12. Toys and sporting goods 13. Household utensils of wood Paper Products 1. Boxes and packaging materials 2. Carbon paper including diazo paper, electrostatic copy papers 3. Pulp from indigenous raw materials Fiber Products 1. Coconut coir 2. Carpets and rugs 3. Cordage, twines, rope, fishing nets, abaca and synthetic Processed Rubber Products 1. Adhesives 2. Rubber latex 3. Crumb rubber 4. Camel back 5. Gums 6. Rubber tiles 7. Tubes and hoses 8. Rubber gloves 9. Rubber tires and inner tubes 10. Curing tube and sectional air bag 11. Rubber automotive parts such as vibration dampers caps, weather strips, handles and pedals, carpet underlay made of rubber 12. Rubber toys and sporting goods 13. Rubber belts Chemicals and Chemical Products 1. Almaciga resin (processed) 2. Silica gel 3. Iron oxide 4. Enzymes (from substantially domestic sources) 5. Glazing putty 6. Ink 7. Cosmetics, perfumery 8. Wax and wax products 9. Glues 10. Photographic chemicals 11. Mosquito coils 12. Modified hard resins 13. Chemical solvents 14. Charcoal 15. Refined glycerine 16. Alcohol 17. Blowing agents from rubber and plastic compound 18. Essentials oils 19. Disposable hypodermic needle and syringe 20. Fiber-tipped pens 21. Chemical gypsum 22. Organic fertilizer Pharmaceutical Products 1. Pharmaceuticals 2. Wadding, gauze, bandages, adhesives, similar articles 3. Dentures and fillings Textile Products 1. Fabrics of abaca, sinamay, burlap, jusi, pineapple and other bast fibers 2. Specialty garments such as laces, garters, band, towels 3. Embroideries 4. Non-woven fabrics and articles thereof 5. Other made-up articles of textiles, plastic, rubber and leather 6. Garments (at least 70% of production must be exported) only for Mindanao 7. Table cloths 8. Mosquito nets 9. Processed abaca fiber Non-Metallic Products 1. Marble slabs, tile chips and curios 2. Cement additives 3. Asphalt batching 4. Reinforced fiber glass products 5. Processed marble blocks 6. Cement floor tiles 7. Asbestos tiles 8. Pipes and tubes, asbestos cement 9. Roofing tiles and fire bricks 10. Clay products such as pottery roofing tiled and paste frits 11. Ceramic products such as tiles (glazed, vitrified), sanitary ware sinks, biders, etc., except dinnerware 12. Safety glass 13. Asbestos fibers 14. Coal, limestone, clay, marble 15. Silicon metal 16. Silicon carbide 17. Hollow block Metallic Products 1. Pyrite (roasted and unroasted) 2. Pyrite cinders or iron sulfite 3. Manganese concentrates 4. Silver concentrates and bars 5. Prefabricated and fabricated structural products made of iron and steel and cement and other materials (except ordinary hollow blocks) 6. Steel drums 7. Pails 8. Bolts and nuts 9. Household utensils made of metal including enamelled utensils 10. Kitchen appliances and tools hand-operated such as meat grinders, coconut graters 11. Cutlery such as scissors, blades, tailor's shears, shovels, spades, rakes, saws, knives 12. Razor blades 13. Building hardware such as hinges, door knobs, door bolts and window rotor-operators 14. Safes (e.g. record safes and tapeguards) 15. Strong boxes, armored and reinforced strong room doors and compartments and fittings (e.g. insulated filing cabinets) 16. Filing cabinets, racks, sorting boxes, papers trays, paper rests and similar office equipment of base metal 17. Gas lamps 18. Metallic closures and screw caps 19. Toys and sporting goods 20. Flatware 21. Locks 22. Buckles and metal plated accessories Machinery and Equipment and Parts 1. Parts of trucks, passenger trucks, automobiles and other commercial vehicles cdlex 2. Rice mill parts 3. Tractor parts 4. Bicycles and parts 5. Loom reeds 6. Grain dryers 7. Palay thresher (power operated) 8. Disc plows, disc harrows and roto tillers 9. Sewing machines and parts Electrical Machinery Equipment and Parts 1. Formed aluminum parts such as door shelves, foot shelves and/or parts thereof 2. Welding electrodes 3. Motor control center 4. Hermetic compressors 5. Evaporators 6. Condensers and heat exchangers 7. Fire alarm systems 8. Fluorescent and mercury lamp ballasts 9. Storage batteries 10. Electrical and electronic machinery, equipment, apparatus, parts, components 11. Bus ducts 12. Light dimmers 13. Graphite electrodes 14. Magnetic starters 15. Flashlights 16. Ignition coils 17. Transceivers 18. Electrical tape 19. Film capacitors Transport Equipment and Parts 1. Motor vehicle transmission 2. Automotive propeller shafts 3. Automotive clutches 4. Camshafts for engines 5. Electric motors for automotive use 6. Motorcycle parts Other Products 1. Animal feeds (outside Metro Manila) 2. Garment hangers of wood, plastic or metal 3. Plastic products such as light diffusers, footwear, containers, sheets, raincoats, packaging materials, brushes, brooms, gloves, toothbrushes, toys and sporting goods, optical frames 4. Tanned leather 5. Leather products such as purses, wallets, belts, straps, gloves, footwear 6. Handicrafts such as lampshades, placemats, shellcraft, hats, household utensils, toys and sporting goods 7. Umbrellas 8. Jewelry (except precious stones) 9. Pins 10. Clasps, hooks, eyes, buckles, etc. of base metal 11. Musical instruments and parts 12. Buttons 13. Zippers 14. School and office supplies such as fasteners, pencils, folders, paper clips, pens and holders, bookbinders, rulers, desk pieces, etc. 15. Wastes recycling 16. Threads of cotton or synthetic fiber 17. Cufflinks 18. Plaques and trophies APPENDIX 28 RULES AND REGULATIONS GOVERNING THE GUARANTEE COVERAGE OF FOOD QUEDAN AND CHATTEL MORTGAGE ON FOOD DEPOSIT UNDER THE PROGRAM. Pursuant to Letters of Instructions No. 704, 1024 and 1139 dated June 9, 1978, May 22, 1980 and May 25, 1981, respectively, and Executive Order No. 849 dated November 26, 1982, the following rules and regulations governing the operations of the guarantee coverage of food quedan/chattel mortgage on food deposits apply: cdta a. Definition of terms unless otherwise specified, the following terms used in this Appendix shall mean: (1) Fund the Quedan Guarantee Fund established under LOI No. 704, as amended, to guarantee the existence of food in storage covered by food quedan/chattel mortgage up to eighty per cent (80%) of the outstanding loan. (2) Food Quedan (FQ) simply known otherwise as quedan, a negotiable warehouse receipt by the terms of which the food deposit in a bonded warehouse duly licensed by NFA/Bureau of Domestic Trade, shall be delivered to the depositor or upon his order, or to bearer or holder in due course for value of the said receipt upon demand. (3) Food deposit a quantity of grains, grains substitutes and non-grain food commodities delivered to and accepted by a bonded warehouseman for the purpose of storage and for which a quedan is issued/chattel mortgage executed, or the quantity of said food commodities owned by a bonded warehouseman stored in his warehouse and for which a quedan is issued/chattel mortgage executed, subject to NFA's requirements as to previous inspection and affidavit of ownership of the commodity in case of grains and/or grains substitutes. For purposes of these rules, grains and grains substitute shall include palay, milled rice, corngrains, sorghum, soybeans, mongo and peanuts. Non-grain food commodities shall include, but shall not be limited to garlic, onions, potatoes, oranges, pomelo, cheese curd, cheese pimiento, assorted meat, beef trimmings, boneless beef, broilers, cocoa butter, briskets, lamb legs, pork fats, veal hinds, processed fruits, dried squid, marine products, shark meat, smoked fish, ham processed meat, fruit and orange concentrates. (4) NFA the National Food Authority, a body corporate organized and existing under and by virtue of Presidential Decree No. 4, as amended by Presidential Decree Nos. 699, 1485 and 1770, for the integrated growth and development of the food industry. (5) Board a group of officials, otherwise known as the Quedan Guarantee Fund Board, which is empowered to administer the Fund, and is composed of the NFA Administrator as Chairman, with the Central Bank Governor and the Minister of the Budget or their duly authorized representatives as members. (6) Food businessman (FB) an NFA licensed/registered food businessman, NFA accredited farmer; Area Marketing Cooperative (AMC)/Samahang Nayon endorsed by the Bureau of Cooperatives Development (BCOD) and likewise licensed/registered with NFA, or producer/processor/manufacturer/ trader of food commodities other than grains or grains substitutes. (7) Borrower a food businessman who intends to secure or in fact has secured a loan from lending bank by pledging food quedans or amounting a chattel mortgage on food deposits. (8) Lending bank any banking institution organized and existing under the laws of the Republic of the Philippines and duly authorized by the Central Bank of the Philippines and accredited by the Quedan Board to participate in the Food Quedan Financing Program. (9) Maturity of the loan the due date for the full payment of the loan granted by a lending bank to a food businessman as appearing in the promissory note and/or other legal document, or an earlier date than as above specified brought about by confirmed findings in a joint inspection that the food deposit is wholly or partially non-existent. (10) Bond an undertaking conditioned to respond or answer for the value of food commodities actually delivered and received at any time the warehouseman is unable to return said food deposit or to pay for its value. b. Purpose of the Fund the fund has been established to further strengthen the integrity and acceptability of the food quedan/chattel mortgage on food deposits by undertaking to guarantee the existence of food businessman with a lending bank and thereby develop the quedan/chattel mortgage as a convenient credit instrument for channelling the banking sector's loanable funds to augment the food businessman's working capital for food procurement operation and enhances the stabilization of farm prices of storable food commodities. c. Administration of the Fund the fund shall be administered as hereunder outlined: (1) The funds and monies accruing to the Fund shall be administered by the Board; (2) The Board shall adopt such policies, rules and regulations as may be necessary to administer the fund and to effectively achieve the objective of the Food Quedan Financing Program; (3) The Board management staff shall assist in the processing of application for guarantee coverage, claims for guarantee payments of lending banks and in other matters pertaining to the administration of the Fund. d. Eligible quedan/chattel mortgage for guarantee coverage Only food quedans pledged/chattel mortgage covering food deposits stored in a duly licensed bonded warehouse executed by a food businessman for the purpose of securing commodity loan from a lending bank shall be eligible for guarantee coverage. e. Extent of the coverage The Fund shall guarantee the existence of food deposits stored in a duly licensed bonded warehouse covered by quedan pledged or chattel mortgage executed in favor of a lending bank under the Food Quedan Financing Program up to an amount equivalent to eighty per cent (80%) of the outstanding loan. f. Extent of liability of the Fund The liability of the Fund to the Lending bank shall be up to eighty per cent (80%) of the outstanding loan, inclusive of interest as of maturity date of loan, after deducting the sales proceeds of existing food deposits, if any, Provided , that the non-payment of said loan is due to the instances enumerated in Item "m" hereof. g. Requirements for guarantee coverage A lending bank desiring to avail of the guarantee coverage on quedans pledged/chattel mortgage for commodity loans to food businessman must comply with the following requirements: (1) The execution of a guarantee agreement with the Board in a prescribed form. (2) The execution of the guarantee agreement and for as long as it is in full force and effect, the lending bank shall submit to the Board, or to the regional/provincial offices of the National Food Authority (NFA) within fifteen (15) calendar days from the date of release of loans, the list of quedans/chattel for guarantee coverage in a prescribed form. The list shall be submitted directly to the Board or to the nearest NFA office, either through personal delivery or through registered mails. In the first case, the date of acknowledgement by any authorized representative of the Board/NFA on the copies of list filed or submitted and in the second case, the date of mailing postmarked on the envelope or the registry receipt shall be considered as the date of filing or submission; and (3) The remittance of the guarantee fee to the Board directly or thru the nearest NFA office together with the list of quedans/chattel mortgage for guarantee coverage. h. Effectivity of guarantee coverage After the list of quedans/chattel mortgage for guarantee coverage shall have been submitted by the lending bank and consequently approved by the Board the effectivity of the guarantee coverage shall retroact to the date of the submission of the said list as provided for in item "g(2)" above. All quedan/chattel mortgage loans with approved guarantee coverage shall continue to enjoy said guarantee even after the execution of a food trust receipt (FTR) pursuant to the guidelines on its use under the Food Quedan Financing Program and except as provided under the Item "p(4)" hereof. i. Guarantee fee A guarantee fee of one per cent (1%) per annum of the amount of every loan extended to food businessmen shall be paid by the lending bank to the Board. Said fee shall not be passed on to the borrower and shall be non-refundable. j. Joint inspection of stocks In the event of failure of food businessmen to pay wholly or in part his loan upon maturity, the lending bank shall, within fifteen (15) calendar days, notify the Board after which a joint inspection by authorized representatives of the lending bank, the Board and NFA shall be conducted for the purpose of assessing the quality and quantity of the food deposit covered by the quedan/chattel mortgage. A joint inspection may, likewise, be conducted even before the maturity of the loan at the instance of the lending bank, the Board or NFA. After the joint inspection, a report in a standard format shall immediately be submitted to the Board. k. Sale of food deposits upon maturity of the loan If on the basis of the findings of the joint inspection the existing food deposit is deemed sufficient to satisfy the outstanding loan, the lending bank shall allow the sale thereof by the borrower, within a reasonable period, under the supervision of the Board and/or NFA and proceeds of sale shall be applied to the outstanding loan. In case there has been a reduction in the quantity of food deposits and the value of the reminder is not sufficient to satisfy the outstanding loan, the lending bank shall, likewise, allow the sale of said stocks by the borrower as above specified and proceeds of sale shall be applied to the outstanding loan. The loan balance shall, thereafter be subject for claim against the fund to the extent provided for in Item "f" above. l. Purchase guarantee of food deposit If the existing food deposit cannot be sold at a price higher than the prevailing NFA's buying price or government support price, as the case may be, NFA shall purchase such portion of the existing food deposit equivalent to the outstanding loan covered by food quedan/chattel mortgage at the prevailing government support price and the sale proceeds thereof shall be applied for payment of the outstanding loan. m. Claim against the Fund The lending bank may file a claim against the guarantee fund to the extent provided for in Item "f" above, in case the loan is not fully paid upon maturity, in any of the following instances: (1) When there is total non-existence of stocks covered by pledged quedans/chattel mortgage as verified by the findings of joint inspection; or (2) When there has been a reduction in the quantity of food deposits covered by quedan/chattel mortgage, the sales proceeds of the remainder is not sufficient to satisfy the outstanding loan. n. Payment of claim The Board shall pay the guarantee claim within fifteen (15) working days from receipt thereof, to the extent allowed under Item "f" subject to the conditions set forth in Items "l" and "m" and after the lending bank shall have filed a claim for guarantee payment in the prescribed form, provided that the guarantee coverage shall not have been cancelled or nullified under any of the grounds enumerated in item "p". o. Application and remittance of recoveries Any amount recovered or collected from the borrower and/or the bonds subsequent to the payment of claim against the fund shall be applied to the unpaid loan on a pro rate basis of eighty per cent (80%) to the fund and twenty per cent (20%) to the lending bank. The collected amount due the Fund shall, without necessity of demand, be remitted to the Board within fifteen (15) calendar days from date of collection, otherwise, the lending bank shall pay an amount equivalent to one percent (1%) per month on the amount due as liquidated damages and another one per cent (1%) per month as interest thereon computed from the date of collection up to the date of remittance. In addition, such violation shall constitute a ground for disapproval of future application for guarantee coverage. p. Grounds for cancellation or nullification of guarantee coverage . Any of the following shall be a ground for cancellation or nullification of guarantee coverage and/or non-payment of guarantee claims: (1) When there is collusion between the borrower and the lending bank in the extension of credit to the prejudice of the Fund. Collusion exists when: (a) the borrower and the official(s) and/or employee(s) of the lending bank enter into an agreement for fraudulent purposes or whenever said parties conspire to defraud the Fund; or (b) the lending bank receives the sales proceeds under the Food Trust Receipt Agreement for deposit in the name of the borrower before maturity of the loan but subsequently allows withdrawal of the name by the borrower without payment of the loan, in violation of the provisions of said Agreement and to the prejudice of the Fund; (2) When the lending bank makes false statements, misrepresentation, omission or concealment in the reports submitted to, and/or in the claims filed with the Board; (3) When the lending bank violates any of the provisions of these rules and regulations; and (4) When the lending bank fails to submit a copy of the Food Trusts Receipt Agreement within fifteen (15) calendar days from date of execution of the FTR to the Quedan Board or the nearest NFA office. The aforementioned grounds shall not preclude the Board from cancelling or nullifying its guarantee coverage for other causes concerning fraud, bad faith or other machinations. cd q. Applicability of other penalties The penalties provided for in these rules and regulations shall be without prejudice to the imposition of other administrative sanctions as well as the filing of civil and/or criminal cases as may be warranted by circumstances. APPENDIX 29 REGIONAL GROUPINGS OF PROVINCES FOR PURPOSES OF THE REQUIRED INVESTMENT-DEPOSIT RATIO OF COMMERCIAL BANK BRANCHES IN A REGION (Appendix to Subsec. 1393.6) Region No. I Ilocos Region (Regional Center-San Fernando, La Union) 1. Ilocos Norte 2. Ilocos Sur 3. Abra 4. La Union 5. Benguet 6. Mountain Province 7. Pangasinan 8. Baguio City 9. Laoag City 10. Dagupan City 11. San Carlos City Region No. II Cagayan Valley Region (Regional Center-Tuguegarao, Cagayan) 1. Batanes 2. Cagayan 3. Isabela 4. Nueva Vizcaya 5. Quirino 6. Ifugao 7. Kalinga-Apayao Region No. III Central Luzon Region (Regional Center San Fernando, Pampanga) 1. Tarlac 2. Nueva Ecija 3. Pampanga 4. Zambales 5. Bulacan * 6. Bataan 7. Angeles City 8. Cabanatuan City 9. Olongapo City 10. Palayan City 11. San Jose City (Nueva Ecija) Region No. IV Metropolitan Manila Area 1. Manila 2. Quezon City 3. Pasay City 4. Caloocan City 5. Makati, Rizal 6. Mandaluyong, Rizal 7. San Juan, Rizal 8. Las Pias, Rizal 9. Malabon, Rizal 10. Navotas, Rizal 11. Pasig, Rizal 12. Pateros, Rizal 13. Paraaque, Rizal 14. Marikina, Rizal 15. Muntinlupa, Rizal 16. Taguig, Rizal 17. Valenzuela, Bulacan Region No. IV-A Southern Tagalog Region 1. Towns of Rizal not included in Metropolitan Manila 2. Cavite 3. Laguna 4. Batangas 5. Quezon 6. Aurora (sub-province) 7. Marinduque 8. Mindoro Oriental 9. Mindoro Occidental 10. Romblon 11. Palawan 12. Batangas City 13. Cavite City 14. Lipa City 15. Lucena City 16. San Pablo City 17. Tagaytay City 18. Trece Martires City 19. Puerto Princesa City Region No. V Bicol Region (Regional Center Legaspi City) 1. Camarines Norte 2. Camarines Sur 3. Albay 4. Catanduanes 5. Masbate 6. Sorsogon 7. Iriga City 8. Legaspi City 9. Naga City Region No. VI Western Visayas Region (Regional Center Iloilo City) 1. Negros Occidental 2. Iloilo 3. Guimaras (sub-province) 4. Antique 5. Aklan 6. Capiz 7. Bacolod City 8. Bago City 9. Cadiz City 10. Iloilo City 11. La Carlota City 12. Roxas City 13. San Carlos City 14. Silay City Region No. VII Central Visayas Region (Regional Center Cebu City) 1. Negros Oriental 2. Siquijor 3. Cebu 4. Bohol 5. Bais City 6. Canlaon City 7. Cebu City 8. Danao City 9. Dumaguete City 10. Lapu-Lapu City 11. Mandaue City 12. Tagbilaran City 13. Toledo City Region No. VIII Eastern Visayas Region (Regional Center Tacloban City) 1. Northern Samar 2. Eastern Samar 3. Western Samar 4. Leyte 5. Southern Leyte 6. Biliran (sub-province) 7. Calbayog City 8. Ormoc City 9. Tacloban City Region No. IX Western Mindanao Region (Regional Center Jolo) 1. Zamboanga del Norte 2. Zamboanga del Sur 3. Basilan 4. Sulu 5. Tawi-Tawi 6. Dapitan City 7. Dipolog City 8. Pagadian City 9. Zamboanga City Region No. X Northern Mindanao Region (Regional Center Cagayan de Oro City) 1. Camiguin 2. Misamis Oriental 3. Misamis Occidental 4. Bukidnon 5. Agusan del Norte 6. Agusan del Sur 7. Surigao del Norte 8. Cagayan de Oro City 9. Gingoog City 10. Oroquieta City 11. Ozamis City 12. Tangub City 13. Surigao City 14. Butuan City Region No. XI Southern Mindanao Region (Regional Center Davao City) 1. Davao del Norte 2. Davao Oriental 3. Davao del Sur 4. South Cotabato 5. Surigao del Sur 6. Davao City 7. General Santos City Region No. XII Central Mindanao Region (Regional Center Cotabato City) 1. Lanao del Norte 2. Lanao del Sur 3. Maguindanao 4. North Cotabato 5. Sultan Kudarat 6. Iligan City 7. Marawi City 8. Cotabato City For purposes of computing the loan/investment-deposit ratio, exclude banking offices located within Greater Manila Area, as follows: Cities 1. City of Manila 2. Quezon City 3. Pasay City 4. Caloocan City Municipalities 1. Makati 2. Malabon 3. Mandaluyong 4. Marikina 5. Navotas 6. Paraaque 7. Pasig 8. San Juan Footnotes * Excluding the town of Valenzuela which is included in Region IV-Metropolitan Manila Area pursuant to PD 824. APPENDIX 30 CREDIT PRIORITY CLASSIFICATION (Appendix to Sec. 1395) Priority I a. Production of agricultural, including forestry and fishery, and industrial goods which (1) possess growth potential in competitive domestic and world markets, (2) contribute most to the development of the economy, (3) provide for the satisfaction of basic wants of the population as a whole, and (4) require resources in addition to their self-financing capabilities. cdti b. Marketing of export products, primarily those goods that contain the maximum possible domestic processing and labor content. c. Marketing in the internal market of domestic products which fall under Priority I and imported basic consumer goods by Filipino merchandisers. d. Importation and marketing of capital equipment, raw materials and supplies for the production and distribution of Priority I products. e. Public utilities which are not over-crowded and are necessary to support the production and distribution of Priority I goods or to satisfy basic wants. f. Other services which are not over-crowded and which are necessary for (1) the development of desirable knowledge and skills, (2) the support of the production and distribution of Priority I products, and (3) the promotion of tourism and cultural pursuits. g. Construction of (1) infrastructure projects, (2) physical plants necessary for the production and distribution of Priority I products and services, and (3) individual low cost housing for the lower income groups of the population. Priority II a. Production and distribution of goods and services which do not qualify under the Priority I category. b. Real estate loans (construction, acquisition, development and refinancing of real estate) other than those specified under Priority I. c. Consumption. d. Other non-productive and speculative activities. ECONOMIC ACTIVITIES FALLING UNDER PRIORITY I A. Economic Activities Eligible for Credits up to Eighty Per Cent (80%) of Loan Value of Credit Instrument 1. Agriculture, Fisheries and Forestry a. Agricultural 1) Abaca 2) Cassava 3) Cattle and dairy farms 4) Coconut 5) Coffee and cocoa 6) Corn 7) Palay or rice 8) Piggery 9) Poultry 10) Ramie 11) Rubber Plantation 12) Sugar * 13) Other fruits and vegetables b. Fisheries 1) Fishponds and inland fishing 2) Marine fishing c. Forestry 1) Forest nurseries and reforestation projects 2. Mining and Quarrying a. Metal Mining 1) Chromite 2) Copper 3) Iron 4) Lead 5) Manganese 6) Mercury and quicksilver 7) Nickel 8) Zinc b. Non-Metallic Mining 1) Asbestos 2) Sulphur 3) Coal 4) Gypsum 3. Manufacturing a. Basic Metal Industries 1) Blast furnaces, steel work and rolling mills 2) Iron and steel basic industries 3) Iron and steel foundries 4) Non-ferrous metal basic industries b. Chemical and Chemical Products 1) Basic chemicals 2) Drugs and other pharmaceutical preparations 3) Fertilizer c. Coconut Products and their Preparation 1) Coconut oil, edible 2) Coconut oil, inedible 3) Copra meal and cake d. Electrical Machinery, Apparatus and Appliances 1) Transmissions and distribution equipment e. Food Manufacturing 1) Canning and preserving of fish and other sea foods a) Fish canning 2) Canning and preserving of fruits and vegetables a) Canning, drying, brining, pickling or otherwise preserving or preparing vegetables b) Canning, drying or otherwise preparing and preserving fruits 3) Slaughtering, preparation and preserving of meat 4) Sugar factories and refineries a) Sugar refining plants * 5) Miscellaneous food preparation a) Prepared feeds for animals and fowls f. Furniture and Fixtures Manufacture 1) Rattan and bamboo furniture g. Leather and Leather Products 1) Tanning and finishing h. Lumber and Wood Products 1) Veneer, plywood and prefabricated products i. Machinery, Equipment, Accessories and Parts 1) Agricultural machinery 2) Engines and turbines 3) Industrials construction and mining machinery j. Non-Metallic Products 1) Cement k. Paper and Paper Products 1) Pulp, paper and paperboard l. Petroleum and Coal Products 1) Coke m. Textile, Cordage and Twines Manufactures 1) Cordage, rope, twines and nets 2) Hemp milling, abaca stripping and baling establishments 3) Knitting mills 4) Spinning, weaving and finishing of textiles n. Transportation Equipment and Parts 1) Aircrafts and parts 2) Motor vehicles, equipment and parts 3) Motorcycles, bicycles and parts 4) Railroad equipment 5) Ships and boats o. Miscellaneous Manufacturing Industries 1) Laboratory, engineering and medical instruments 4. Construction a. Contract 1) Building construction a) Commercial and industrial projects * 5. Public Utilities a. Ice and Ice Refrigeration Plants b. Operation of Wharves, Dry Docks, Etc. c. Warehousing d. Water Supply and Sanitary Services 1) Irrigation systems 2) Water supply systems 6. Commerce a. Export Products * b. Importation of Capital Goods and Raw Materials * c. Domestic Trade (Filipino only) Wholesales and Retail B. Economic Activities Eligible for Credits up to Sixty Per Cent (60%) of the Loan Value of the Credit Instrument ** 1. Agriculture, Fisheries and Forestry a. Agricultural 1) Citrus 2) Cotton 3) Salt farming 4) Soybean 5) Other root crops 2. Mining and Quarrying a. Metal Mining 1) Gold 2) Silver b. Non-Metallic Mining 1) Asphalt 2) Marble 3. Manufacturing a. Chemical and Chemical Products 1) Dyeing and tanning materials 2) Explosives (excluding firecrackers) b. Coconut Products and their preparations 1) Dessicated coconut c. Electrical Machinery, Apparatus and Appliances 1) Communication equipment 2) Dry cells and storage batteries d. Food Manufacturing 1) Canning and preserving of fruits and vegetables a) Fruits and vegetables, sauces and seasoning 2) Dairy products a) Milk processing 3) Miscellaneous food preparations a) Coffee roasting, grinding and/or processing e. Furniture and Fixture Manufacture 1) Wood Furniture f. Lumber and Wood Products 1) Cork 2) Sashes and doors 3) Sawn and planed lumber 4) Wooden box 5) Wood chips g. Machinery, Equipment, Accessories and Parts 1) Office and store machines and devices h. Metal Industries 1) Cutlery, handtools and general products 2) Fabricated structural and metal products 3) Tin and aluminum ware i. Non-Metallic Products 1) Glass and glass products 2) Structural clay products j. Textile, Cordage and Twines Manufactures 1) Jute bags and sacks k. Miscellaneous Manufacturing Industries 1) Cottage native handicraft industries 2) Footwear (other than rubber) 3) Photographic and optical goods 4. Construction a. Contract 1) Building construction a) Commercial and industrial projects * 2) Highway and street construction (including road building) 5. Public Utilities a. Common Carriers 1) Airlines and other air transportation 2) Motor vehicles 3) Railroad and railway companies 4) Steamboats and steamship lines b. Communication 1) Telecommunication (cable, mail and express, telegraph, telephone) c. Electricity, Gas and Steam 1) Electric, light, heat and power d. Water Supply and Sanitary Services 1) Garbage, sewerage and disposal system cdtech 6. Services a. Business and Professional Services 1) Engineering and technical services b. Educational Services 1) Private vocational and trade schools 2) Public universities and higher educational institutions 3) Public vocational and trade schools c. Medical and Other Health Services 1) Public health services d. Recreation Services 1) Theatrical production (i.e., all performing arts) e. Research and Scientific Institutions 7. Financial a. Banks 1) Private development banks 2) Rural banks 8. Commerce a. Export Products * b. Importation of Capital Goods and Raw Materials * c. Domestic Trade (Filipino only) Wholesale and Retail * 9. Other Activities a. Loans for Other Dollar-Earning purposes Not Elsewhere Classified (included in this category are the construction, development and operations of first-class hotels which cater to the needs of the tourist industry). C. Economic Activities Eligible for Credits up to Sixty Per Cent (60%) of the Loan Value of the Credit Instrument ** 1. Agriculture, Fisheries and Forestry a. Agricultural 1) Pineapple 2) Tobacco, native b. Fisheries 1) Fishery services 2) Pearl fishing and culture, shell gathering and other marine products c. Forestry 1) Forest services 2) Timber tracts 2. Mining and Quarrying a. Non-Metallic Mining 1) Mineral salt 2) Silica 3. Manufacturing a. Apparel and other Finished Products Made from Fabrics and Similar Materials 1) Embroidery shops 2) Wearing apparel b. Chemicals and Chemical Products 1) Paints, varnishes and lacquers 2) Soaps and other cleansing preparations c. Coconut Products and their Preparation 1) Copra d. Electrical Machinery, Apparatus and Appliances 1) Electric lamp 2) Household appliances 3) Radio, television, telephone receiving sets, electronic tubes and components e. Food Manufacturing 1) Canning and preserving of fish and other sea foods a) Fish sauce (patis) manufacture b) Shellfish curing, smoking, salting or pickling, n.e.c. 2) Cocoa, chocolate and sugar confectionery a) Cocoa and chocolate processing factories 3) Grain mill products a) Corn mills b) Rice mills c) Tuber flour mills d) Wheat flour 4) Miscellaneous food preparations a) Salt manufacture b) Starch and its products c) Vegetable lard and margarine manufacture d) Vermicelli and noodles manufacture f. Lumber and Wood Products 1) Creosoting and other wood treating g. Metal Industries 1) Fabricated wire products 2) Metal stamping, coating and engraving h. Non-Metallic Products 1) Plastic products 2) Pottery, china, earthenware 3) Concrete aggregates 4) Concrete products a) Cement products light weight aggregate b) Pre-mold concrete light aggregate i. Paper and Paper Products 1) Coated and glazed paper products j. Printing, Publishing and Allied Industries 1) Book publishing and printing 2) Newspaper and periodical publishing k. Tobacco 1) Cigar and cigarette factories (native) l. Miscellaneous Manufacturing Industries 1) Oxygen, acetylene and similar products 2) Silver and gold work without precious stones 3) Musical instruments and parts a) Blank recording discs b) Metal stampers 4. Construction a. Contract 1) Building construction a) Government projects b) Commercial and industrial projects * 2) Heavy construction (including bridges and irrigation projects) b. Personal 1) Construction (not exceeding P30,000) 2) Reconstruction (not exceeding P30,000) 5. Public Utilities a. Electricity, Gas and Steam 1) Gas manufacture and distribution 2) Steam heat and power b. Water Supply and Sanitary Services 1) Drainage system 6. Services a. Medical and Other Health Services 1) Private health services b. Recreation Services 1) Motion picture production 7. Financial a. Banks 1) Commercial banks 2) Savings and mortgage banks aisadc 8. Commerce a. Export products * b. Importation of Capital Goods and Raw Materials * c. Domestic Trade (Filipino only) Wholesale and Retail * Footnotes * Authorized up to December 31, 1979. * To follow rating of economic activities included in the list. ** For updated loan valued see Subsec. 1271.1. APPENDIX 31 LIST OF CLEARING CENTERS (Appendix to Subsec. 1603.1.b) Clearing Centers Address Suburban Towns and Cities within the Clearing Areas Manila Ground Floor of the Central Bank Quezon City, Pasay City, Caloocan City Building San Juan, Mandaluyong, Makati, Paraaque, Navotas, Malabon, Marikina Pasig Metro Manila Angeles City Tablante-Tungol Building Dau (Mabalacat), Guagua, Rizal St., Angeles City San Fernando Pampanga Bacolod City 1 Villasor Building Lacson St. Bacolod City Baguio City 2nd Floor, RCBC Bldg., 85 Harrison Road, Baguio City Batangas City 3rd Floor, Phil. Banking Building Tanauan Batangas Cor. P. Burgos St. and D. Silang St. Batangas City Cabanatuan City 2nd Floor, Liwag Bldg., P. Burgos Ave. Cabanatuan City Cagayan de Oro City 1 Trinidad Building cor. Yacapin & Corales Sts., Cagayan de Oro City Cauayan, Isabela 2nd Floor, Rural Bank of Cauayan Cauayan, Ilagan Building, Rizal Avenue, Cauayan Isabela Santiago Isabela Cebu City 1 4th Floor, SSS Bldg., Jones Ave. Mandaue Cebu Cebu City Cotabato City 2nd Floor, CHT Bldg. Magallanes St., Cotabato City Dagupan City 2nd Floor, R Villamil Urdaneta Pangasinan Building, Perez Blvd. San Carlos City and Burgos St., Dagupan City Davao City 1 C.B. Regional Office Bldg., Pres. Quirino Panabo Davao del Sur Ave., Davao City Dumaguete City Mezzanine Floor, Julio Sy Bldg., V. Locsin St., cor. Cervantes St., Dumaguete City General Santos City 2nd Floor, Metro Bank Building Pioneer Avenue, General Santos City lligan 2nd Floor, Dy Pico Building Quezon Avenue cor. Echiverri St. Iligan City Iloilo City 1 Doa Maruja Building Corner Burgos & Rizal Sts. Iloilo City Kalibo 2nd Floor, RSL Building Archbishop Reyes St. Kalibo, Aklan Laoag City 2nd Floor, Young's Building Batac-Ilocos Norte Nolasco St., Laoag City Vigan-Ilocos Sur Legaspi City 2 3rd Floor, Del Rosario Building II Daraga, Tabaco, Ligao, J.P. Rizal St., Legaspi City Albay Lucena City Bartolome Sy Building Quezon Avenue, Lucena City Naga City 2 6th Floor, PNB Building Iriga Camarines Sur Gen. Luna St., Naga City Olongapo City 3rd Floor, Prudential Bank Bldg. J.P. Rizal Avenue, Olongapo City Ozamis City Ground Floor, Tan-Liong Building Cor. F. Gomez & T. Cebedo Sts. Ozamis City San Fernando, La Union 3rd Floor, C.B. Regional Office Building Quezon Avenue, San Fernando La Union Surigao City Virginia Yutiamco Building Corner Kaimo and Burgos Streets Surigao City Tacloban City 1 Mezzanine Floor, Uy Ting Koc Building Senator Engage St., Tacloban City Tarlac, Tarlac 2nd Floor, T.N. Asiaten Building Paniqui, Tarlac F. Taedo St., cor. Panganiban St. Tarlac, Tarlac Tuguegarao, Cagayan Eleuterio B. Cruz Building Corner Gonzaga & Mabini Streets Tuguegarao, Cagayan Zamboanga City 1 2nd Floor, LHB Building I Veterans Avenue, Zamboanga City Footnotes 1. Participants in the inter-regional clearing operations in Visayas and Mindanao areas. 2. Participants in the inter-regional clearing operations in Southern Luzon area. APPENDIX 32 CLEARING OPERATIONS BETWEEN REGIONAL CLEARING CENTER AND THE MANILA CLEARING CENTER (Tarlac, Tarlac Used as Sample) (Appendix to Subsec. 1603.1.d) Exchanges of clearing items among branches of commercial and savings banks in Tarlac, Tarlac, will be conducted at 4:00 P.M. on each business day as well as on all local holidays in the premises of the Tarlac Regional Clearing Unit in accordance with the clearing regulations embodied in Subsec. 1603.1. Simultaneously, "On Tarlac" checks and "On Manila" checks may be presented for clearing respectively through the Manila Clearing Office and the Tarlac Regional Clearing Unit. LLcd In Manila 4:00 P.M. Manila banks deliver "On Tarlac" checks and dishonored "On Manila" checks picked up at 400 P.M. of the previous day. Manila Banks pick up "On Manila" checks and returned "On Tarlac" checks delivered at 4:00 P.M. at Tarlac the previous day. In Tarlac 4:00 P.M Tarlac banks deliver "On Manila" checks and dishonored "On Tarlac" checks picked up at 4:00 P.M. of the previous day. Tarlac banks pick up "On Tarlac" checks and the returned "On Manila" checks delivered at 4:00 P.M. at Manila the previous day. If not returned on schedule, it is understood that "On Tarlac" and "On Manila" checks delivered to the Manila Clearing Office and Tarlac Regional Clearing Unit, respectively, will be considered "good" after 4:00 P.M. on the third business day following the date of delivery. Items for Clearing Items for clearing shall consist of checks and documents payable on demand and drawn against banks in Manila and its suburbs (Quezon City, Pasay City, Caloocan City, San Juan, Mandaluyong, Makati, Paraaque, Navotas, Malabon, Marikina and Pasig-Metro Manila) on one hand and banks in Tarlac, Tarlac on the other. Settlement of Balances Clearing balances of participating banks in Tarlac, Tarlac, shall be debited or credited, as the case may be to the clearing accounts of their respective head offices with the Central Bank in the afternoon on the date of clearing. Miscellaneous Out-of-town checks shall be sealed in special brown envelope measuring 7" x 11" with the destination "To Tarlac " or "To Manila", as the case may be, properly stamped in bold letters of not less than one (1) inch and three (3) orange stripes, 1/1" wide on the right edge. Banks shall microfilm all out-of-town checks. APPENDIX 33 PROCEDURAL GUIDELINES FOR THE REPRODUCTION OF FACSIMILES OF GOVERNMENT SECURITIES (Appendix to Subsec. 1609.1) 1. All applications/requests for authority to reproduce and use facsimiles of government securities issued by and/or through the Central Bank shall be submitted to the Office of the Governor through the Securities Marketing Department. LLphil To provide sufficient time for the processing thereof, applications/requests must be submitted at least thirty (30) days before the scheduled date of reproduction of the facsimile of the pertinent government security/ies. 2. The application/request must contain, among other things, the following: a. Name of person or entity b. Address c. Purpose/intended use d. Name of printer and address e. Undertaking that applicant shall furnish within five (5) days from the date of reproduction of the facsimile of the corresponding government security/ies, the Securities Marketing Department, Central Bank of the Philippines, for record purposes, with a copy of the facsimile thereof. 3. The Securities Marketing Department shall advise as soon as possible the applicant of the action taken thereon by the Governor. APPENDIX 34 PROCEDURES ON COLLECTION OF FINES FROM BANKS (Appendix to Sec. 1610) For uniform implementation of the regulations on collection of fines from banks (See Sec. 1610), the following procedures shall be observed: 1. The department or office imposing the fine shall furnish the Accounting Department a copy of its notice to the bank for the fines imposed indicating therein the date said notice was received by the bank. This shall serve as basis for entries to Accounts Receivable and debit against the bank's demand deposit account after the lapse of thirty (30) days. 2. In the case of fines which the department/office concerned requests the Accounting Department to bill the bank, the date the bill sent by the Accounting Department is received by the bank shall serve as basis for entries to Accounts Receivable and debit against the bank's demand deposit account after the lapse of thirty (30) days. 3. If the fine is not paid voluntarily within the 30-day period, the Accounting Department shall debit the demand deposit account of the bank, provided, the balance of said demand deposit account is sufficient to cover the fines due. Fines that cannot be debited against the bank's demand deposit account due to insufficiency of balance shall be reported by the Accounting Department to the department/office concerned which shall then recommend the appropriate sanctions against the bank, its directors and/or officers. APPENDIX 35 CLEAN NOTE POLICY (Appended to Sec. 1612) To effect an expeditious withdrawal from circulation of unfit currency notes in order that the Central Bank (CB) could maintain a clean note policy, all banks including their provincial branches shall observe the following guidelines and procedures: 1. Banks shall identify and sort their cash deposit into (a) clean or fit notes and (b) dirty, mutilated or unfit notes in accordance with the "Currency Guide for Bank Tellers, Money Counters and Cash Custodians". 2. Banks shall provide separate containers with padlocks duly sealed for the clean or fit notes and dirty, mutilated or unfit notes. A separate deposit slips shall be accomplished by the depositing bank for each category. The deposit slip for unfit currency notes shall be clearly labelled as "unfit". 3. Whenever there are different denominations to be deposited, bundles/packages of 100, 50, and 20-piso denominations may be placed in one container and 10, 5 and 2-piso denominations in another container. 4. Only dirty, mutilated or unfit notes shall be shipped to the Central Bank. Provincial branches of the PNB authorized to maintain Cash-Held-In-Trust (CHIT) account may make direct shipments to the CB Cash Department or to the nearest CB Regional Offices, Sub-Regional Offices or Cash Units. Provincial branches of banks and other provincial branches of PNB may make direct deposits to the CB Regional Office, Sub-Regional Office or Cash Unit or PNB branch authorized to maintain CHIT account for the Central Bank. 5. The CB Cash Department, Regional Office, Sub-Regional Offices, Cash Units, and PNB branches authorized to maintain CHIT account for the Central Bank, may refuse acceptance of cash deposits not accomplished in accordance with these guidelines. APPENDIX 36 GUIDELINES AND PROCEDURES TO GOVERN VERIFICATION OF CURRENCY NOTES DEPOSITED BY BANKS TO THEIR DEMAND DEPOSIT ACCOUNT WITH THE CENTRAL BANK (Appendix to Sec. 1612) Clean currency notes still fit for circulation, deposited by banks to the Central Bank for credit to their demand deposit accounts will be accepted by the Central Bank Cash Department, after package and bundle count only has been made and shall no longer be subjected to piece-by-piece verification by the Central Bank before the same shall be reissued. For purposes of these guidelines, said clean notes shall be referred to herein as "fit" currency notes. In order that "fit" currency notes accepted by the Central Bank can be immediately reissued to service cash withdrawals of banks, the following guidelines and procedures shall govern such deposits and withdrawals: 1. Banks shall sort their deposits of currency notes into "fit" and "unfit" notes. For purposes of identifying and segregating "fit" from "unfit" currency notes, the "Currency Guide for Tellers, Money Counters and Cash Custodians" shall be strictly followed. 2. Banks shall provide separate containers with padlocks duly sealed for the fit and unfit notes and a separate deposit slip shall be accomplished for each category. 3. Deposits of fit currency notes shall be verified, arranged, and placed in containers in the following manner: a. Notes of a single denomination must be arranged face and top up in packages of 100 pieces each; b. The wrapper of each package shall be plainly marked with: (1) the denomination and amount of currency in the package; (2) the date of verification; (3) the printed name(s) and signature(s) of the bank's employee(s) who performed the verification; (4) the name of the depositing bank. c. Pins, clips, and staple wires, if any, must be removed prior to deposit in order to avoid possible injury to employees and damage to equipment; d. Individual packages of 100 notes each shall be bound in standard units as follows: Standard Unit Denomination No . of Packages Amount 100-piso 1 to 10 P10,000 to P100,000 50-piso 1 to 10 P5,000 to P50,000 20-piso 10 P20,000 10-piso 10 P10,000 5-piso 10 P5,000 2-piso 10 P2,000 e. Notes of different denominations should not be mixed in a single package/bundle. 4. Upon delivery of the currency notes to the Central Bank Cash Department, the representative(s) of the depositing bank shall open the containers and, in his presence, package and bundle count shall be made by CB, CD accountable officers concerned. If found in order, said officer(s) shall acknowledge receipt of the currency deposits. 5. The bundles of currency notes shall be returned to the containers, sealed and padlocked with the key retained and controlled by the representative of the depositing bank. 6. The Central Bank shall service cash withdrawals from the unverified fit currency note deposits previously made by the same bank. casia 7. Only authorized representative(s) of the depositor-bank can open the sealed container(s) corresponding to their unverified fit currency notes deposits from which the Central Bank shall draw to service cash withdrawal of same bank. It is understood that said representatives shall have with them all keys to the containers of their fit currency note deposits whenever they are assigned to CB Cash Department to effect cash withdrawals. 8. Banks must notify the Central Bank at least one (1) day prior to their intended cash withdrawals. 9. Checks presented for withdrawal after 12:00 Noon shall be accepted by the Cash Department for processing and the servicing thereof shall be effected the following day. 10. The authorized representative(s) of the withdrawing bank shall conduct a bundle/package count of the cash withdrawn from their unverified fit currency note deposits before leaving the teller's counter/cash withdrawal area at the Central Bank Cash Department, witnessed by authorized representative(s) of the Central Bank. Any shortage/overage found in the verification by package/bundle count of the cash withdrawn shall be brought to the attention of the Central Bank and shall be debited/credited accordingly to their demand deposit accounts. The Central Bank shall not honor any shortage/overage found after the authorized bank representative(s) have left the teller's counter/cash withdrawal area. 11. Receiving and releasing banks' deposits shall end at 3:00 P.M., the closing time for banking hours. 12. It is understood that there will be no changes in the existing procedures governing the deposit and verification by the Central Bank of unfit currency notes. 13. The Central Bank reserves the right to conduct piece-by-piece verification on the fit currency deposits whenever it deems necessary. APPENDIX 37 GUIDELINES AND PROCEDURES TO GOVERN SHIPMENT OF UNFIT/MUTILATED CURRENCY NOTES TO THE CENTRAL BANK, CASH DEPARTMENT, REGIONAL OFFICES AND CASH UNITS (Appendix to Sec. 1612) Effective immediately, the following guidelines and procedures shall govern shipments of dirty, mutilated or unfit currency notes by provincial branches of banks and by provincial, city and municipal treasurers to the Central Bank Cash Department and CB Regional Offices, Sub-Regional Offices or Cash Units: 1. Unfit/mutilated currency notes shall refer to those notes described in the Guidelines and Procedures to Govern Verification of Currency Notes Deposited by Banks to their Demand Deposit Account with the Central Bank (Appendix 36). 2. Only dirty, mutilated or unfit currency notes shall be shipped to the Central Bank. Provincial branches of banks and provincial, city and municipal treasurers may make direct shipments of such currency to the Central Bank Cash Department or to the nearest CB Regional Offices, Sub-Regional Offices and Cash Units. 3. Preparation of currency shipment a. Currency notes of a single denomination must be arranged face and top up in packages of one hundred (100) pieces each, banded with paper strap/wrapper. The paper strap/wrapper of each package shall be plainly marked with: the denomination and amount of currency in the package; the date of verification; the initials of person(s) who performed the verification; and the name of the depositing bank, or remitting provincial, city or municipal treasurer. Pins, clips and staple wires, if any, must be removed from the notes prior to shipment in order to avoid possible injury to employees involved in the verification thereof and damage to equipment. Individual packages of 100 pieces each shall be bound in standard units of ten (10) packages each of the same denomination to make a bundle. Every bundle shall be well secured with twine or rubber bands. b. Under no circumstances shall notes of different denominations be mixed in a single package or bundle, nor shall currency notes in loose pieces be forwarded to the Central Bank Cash Department, Regional Offices, Sub-Regional Offices and Cash Units. Such loose notes shall be retained until additional pieces of the same denomination sufficient to complete a package have been accumulated. c. Fragments of currency or torn notes which clearly represent and retain three-fifths (3/5) or more of its surface shall be carefully mended with transparent tape on the back (not on the face) in a manner which preserves as nearly as possible the original design and size of the note. 4. Packing a. Currency notes arranged in packages and bundles as herein provided shall be wrapped in thick Manila paper, properly sealed with wax and placed inside wooden (3/4" lumber) boxes measuring 26"L x 17"W x 16"H which shall be strongly fastened with nails, banded with steel wire strap and sealed with sealing wax. The seal must be embedded on the wood to cover the joints. The original packing list/invoice showing the total amount and the denominational breakdown of the currency, duly certified by the head of the branch of bank or the provincial, city or municipal treasurer making the shipment and the auditor thereof, shall be placed inside the box. b. Whenever there are different denominations to be shipped, bundles/packages of 100, 50 and 20-piso denominations may be placed in one (1) box and the 10, 5 and 2-piso denominations in a separate box, with corresponding packing lists. c. As a precautionary measure, no indication which would purportedly reveal the contents shall appear outside of the package/box except the addressee and sender. 5. The maximum amount of currency to be shipped shall not exceed FORTY MILLION PESOS (P40,000,000.00) for any one shipment in any given day. 6. Shipments of currency notes shall be effected through the Philippine Air Lines (PAL), being the government flag carrier. In places where PAL plane service is not available, the currency may be shipped by boat or through armored car. 7. Method of shipment and security measures a. At least two (2) working days before anticipated or actual shipment of currency is made, the shipper-bank shall advise its head office and the Central Bank by coded telegram (using a set of codes previously agreed upon) of intended shipment, stating the amount, number of boxes, name of the carrier, flight number and the date of shipment. Upon receipt of advice, the head office shall immediately notify the Cash Department by telephone which shall be followed by a confirmation letter. The Central Bank must be advised immediately through the fastest means of communications regarding any cancelled or delayed shipments. b. Currency shipment shall be delivered into the custody of the carrier (PAL), accompanied and witnessed by responsible personnel of the shipper and by armed escorts or guards. c. No shipment shall be made when its arrival at destination will be on a Saturday, Sunday or holiday, unless delay is due to circumstances beyond control, in which case the Central Bank should be duly informed thereof. 8. The Central Bank shall duly acknowledge by confirmation-letter receipt of the shipment, subject to verification. The corresponding credit advice shall be transmitted to the head office of the bank concerned, copy furnished the shipper-branch or agency, subject to subsequent adjustments for any shortages, overages, no value, counterfeits and/or other discrepancies found upon verification of shipment. In case the shipper is a provincial, city or municipal treasurer, the Central Bank shall send the corresponding CB Expense Check as payment/redemption thereof. 9. Insurance coverage for every shipment of currency shall be arranged by the Central Bank through the CB Self-Insurance System upon receipt of advice from the shipper. The insurance coverage shall be against loss by theft, robbery or any cause whatsoever from the time the shipment leaves the premises of the shipper until the shipment shall have been delivered inside the Central Bank vaults. The Central Bank will not assume any risk of loss, damage or pilferage on any shipment not made in conformity with the provisions of these Guidelines nor those caused by the infidelity, fraud or dishonesty of the personnel or security escorts of the shipper. 10. Only freight and insurance charges shall be for the account of the Central Bank and shall be payable at the Central Bank Head Office or its Regional Offices. Freight charges must be manifested in the corresponding airway bill in case of shipment by plane or bill of lading if by boat, and must be arranged on a "CB-Charge Account" basis. 11. In case fit currency notes and coins are found in a shipment, freight and insurance charges and other related expenses thereof shall be for the account of the shipper. LLjur 12. Verification of shipments All currency shipped to the Central Bank shall be received subject to verification. Opening of the containers or scheduled date of verification shall be done by authorized representatives of shipper-bank's head office and actual piece-by-piece verification of the currency shall be made only in the presence of said representative(s) of head office, in case the shipper is a bank, or in the presence of the Auditor of the Central Bank or its authorized representative(s), in case the shipper is a provincial, city or municipal treasurer. APPENDIX 39 GUIDELINES ON FOOD QUEDAN FINANCING PROGRAM FOR FOOD TERMINAL, INC. (FTI) DEPOSITS (Appendix to Subsec. 1354.6) Pursuant to Letters of Instructions No. 696, 704, 1024 and 1139, the Food Quedan Financing Program for food deposits at the Food Terminal, Inc. bonded warehouse is hereby adopted and issued for the information and guidance of all concerned: I. Scope Food commodities in storage at the bonded warehouse of the Food Terminal, Inc. II. Objectives of the Program 1. To augment the operating capital of food traders and encourage their active participation in the local procurement of the basic food commodities; 2. To increase the direct involvement of private commercial banks in agricultural credit in compliance with PD No. 717; 3. To establish and strengthen the integrity and acceptability of food quedans as collateral for loan availment; 4. To enhance further the stabilization of food supply and prices; 5. To support the food production program of the government. III. Legal bases 1. Letter of Instruction No. 704, dated June 9, 1978, establishing a Quedan Guarantee Fund and constituting the Quedan Guarantee Fund Board; 2. Letter of Instruction No. 1024, dated May 22, 1980, authorizing the Quedan Guarantee Fund Board created under Letter of Instruction No. 704 to include grains and other food commodities in its Quedan Financing Program. 3. Letter of Instruction No. 1139, dated May 25, 1981, directing the QGFB to implement the inclusion of other food commodities under the purview of the Quedan Financing Program; 4. Presidential Decree No. 4, dated September 26, 1972, as amended by PD Nos. 699, 1485 and 1770 creating the NFA and prescribing its functions, powers and authorities. IV. Terminology 1. Food trader (FT) a person/business entity in whose name the goods are deposited for storage at FTI's bonded warehouse as evidenced by a food quedan/chattel mortgage contract. 2. Lending bank (LB) any banking institution organized and existing under the laws of the Republic of the Philippines and who has agreed to participate in the Food Quedan Financing Program. 3. Food quedan a negotiable warehouse receipt by the terms of which the food deposit in the FTI bonded warehouse shall be delivered to the depositor upon his order, or to bearer or holder in due course for value of the said receipt. 4. Food deposits any goods/commodity received for storage in the bonded warehouse of the Food Terminal, Inc., such as, but not limited to: onions, garlic, potatoes, processed meat, smoked fish, broilers, pork, beef, beef trimmings, boneless beef, briskets, veal hinds, lamb legs, pork fats, assorted meat, processed fruits, cheese curd, frozen fish and marine products, fruit concentrates, shelled peanuts and such other food commodities as may be jointly be agreed upon by the Quedan Board and the Food Terminal, Inc. 5. Quedan Guarantee Fund Board simply known as Quedan Board, a government corporation attached to the National Food Authority duly authorized to administer the Guarantee Fund for the quedan financing of food commodities pursuant to LOI Nos. 704, 1024 and 1139. 6. Fund the Quedan Guarantee Fund established under LOI No. 704, as amended by LOIs No. 1024 and 1139, to guarantee the existence of grains/food deposits covered by quedan/chattel mortgage up to 80% of the outstanding loan. 7. Food Terminal, Inc . simply known as FTI, a government corporation which, among others, operates a bonded warehouse for food commodities belonging to third parties. V. Statement of policies A. Purpose of loan To finance food businessman in the procurement of food commodities and for other incidental expenses such as transporting, storage, processing and marketing. B. Eligibility requirements of loan applicants 1. Must be a depositor of the bonded warehouses of FTI, 2. Must be a holder in due course of a negotiable food quedan or the owner of food deposits covered under the program and subject of a chattel mortgage; and 3. Must be a depositor of locally produced commodities. C. Terms and conditions 1. Collateral Deed of pledge on the negotiable food quedan issued by FTI/chattel mortgage con-contract on food deposits 2. Loan ceiling The loan ceiling shall be as prescribed by the Central Bank of the Philippines. 3. Loan value There shall be two levels of loan value computed on the basis of the ceiling prices set for specific commodities, if any, or the average market price of the food commodities for the various quarter as may be determined by the Quedan Board. a. 80% of the face value of the food quedan/food deposits covered by chattel mortgage contract for commodities with Grade A specifications. b. 50% of the face value of the food quedan/food deposits covered by chattel mortgage contract for commodities with Grade B specifications. 4. Types of terms of loan Loans may either be a straight loan or one year credit line made available in notes, both for a term not exceeding the number of days specified below for specific commodities: a. 60 days for onion YG, and potatoes b. 90 days for processed meat, smoked fish and Grade B boilers c. 120 days for frozen commodities; beef, pork, beef trimmings, boneless, briskets, veal hinds, lamb legs, pork fats, assorted meat, Grade A broilers, processed fruits/dried apples, dried mangoes, cheese curd, onion RC, frozen fish, and marine products. d. 180 days for fruit concentrates, garlic and shelled peanuts. Term of loan for other food commodities not included herein shall be determined by the Quedan Guarantee Fund Board. 5. Maximum lending bank rates Interest rate of ten per cent (10%) per annum inclusive of service charge. 6. Rediscount rate, value and maturity Promissory notes generated under this credit program may be rediscounted with CB up to 100% of the loan at the rate of three (3%) per cent per annum with maturity not exceeding the same number of days as the term of the original loan. 7. Quedan Guarantee Fund The Fund shall guarantee the existence of food deposits covered by quedan/chattel mortgage up to an amount equivalent to eighty per cent (80%) of the outstanding loan, as provided for in the rules and regulations governing the guarantee coverage of food quedan. The QGFB shall collect from the LB a guarantee fee of one per cent (1%) per annum based on the amount of loan which shall not be passed on to the borrower. 8. Purchase guaranty At the option of the lending bank, the National Food Authority shall undertake the purchase of food deposits equivalent to the outstanding loan covered by food quedan at the prevailing government support price upon the maturity of the loan. VI. Responsibilities of participating agencies A. Central Bank (CB) 1. To disseminate the terms and conditions of the program to eligible lending banks. 2. Within the bank's existing ceiling to extend rediscounting facilities to all eligible papers under the Food Quedan Program. B. Lending banks (LB) 1. To disseminate the terms of loan as well as requirements to its branch offices. 2. To evaluate, process and extend loans under this program. C. Food Terminal, Incorporated (FTI) 1. To periodically inspect and monitor bonded stocks per existing inventory reporting system. 2. To supervise control and monitor Negotiable Bonded Warehouse Receipts (NBWRs) issued to FTI depositors. 3. To conduct joint inspection of stocks with authorized representatives of the lending banks. 4. To ensure that stocks covered by the Quedan Financing Program are not allowed to be withdrawn unless the depositor has settled all his obligations with the lending bank. D. National Food Authority (NFA) To purchase the food stocks equivalent to the outstanding loan covered by quedan at the option of the lending bank upon maturity of the loan. E. Quedan Guarantee Fund Board (QGFB) 1. To administer the Food Quedan Guarantee Fund; 2. To execute a guarantee agreement with eligible LBS; 3. To pay legitimate claims by LBs against the Fund; and 4. To oversee the implementation of LOI 704 and its implementing rules and regulations. VIII. Responsibility of participating borrowers 1. He should follow all the rules and regulations stated. 2. He is not allowed to move nor dispose of the food commodities covered by the program unless he has settled all his obligations with the bank concerned. 3. He should warrant that the goods covered under the program will be of good quality up to the time his loan matures. 4. In case he cannot meet his obligation in due time, he should inform the bank beforehand. 5. He should only use the money borrowed in the operation of his food business. APPENDIX 40 GUIDELINES ON THE USE OF FOOD TRUST RECEIPTS UNDER THE FOOD QUEDAN FINANCING PROGRAM (Appendix to Subsec. 1354.7) Pursuant to P.D. 115 dated January 29, 1973 and Circular No. 011 dated January 20, 1983 of the Quedan Guarantee Fund Board (QGFB), the following guidelines shall apply to the use of food trust receipts (FTR): A food businessman-borrower who secured a loan from a participating lending bank under the quedan financing program may, if the bank so agrees, execute a food trust agreement with said bank to enable him to mill/process/sell his stocks covered by pledged quedan/chattel mortgage, subject to the following conditions: a. Coverage the food trust agreement shall be on a staggered basis such that at any one time, the stocks to be withdrawn shall not exceed twenty percent (20%) of the total quantity covered by the pledged quedan/chattel mortgage; Provided, however , that the lending bank may, in specific cases, allow a maximum of fifty percent (50%) stock withdrawal at any one time, subject to the submission of additional collateral and the approval of the FTR agreement by the QGFB, Provided, further, that subsequent withdrawals of stocks through food trust receipts shall be allowed only after payments have been made for the portion of loan corresponding to the stocks previously withdrawn. b. Co-Makers if the borrower is a third party depositor and not the franchised bonded warehouse operator himself, the lending bank shall in all cases require the franchised bonded warehouse operator in whose warehouse the stocks covered by the pledged quedans are deposited to be the borrower's co-maker. However, if the borrower is a chattel mortgagor, the lending bank shall require said borrower to have two (2) co-makers. c. Requirement for effectivity The food trust receipt agreement to be in full force and effect under the quedan financing program must substantially conform with the prescribed form and no further formality of execution or authentication shall be necessary for the validity of the same. d. Term The term of period of the food trust receipt-agreement must not extend beyond the maturity date of the loan secured by pledged quedan/chattel mortgage. e. Insurance coverage The fire insurance for food deposits required of the warehouse operator pursuant to the rules and regulations of the NFA shall be considered as sufficient compliance with the insurance requirement under PD 115, otherwise known as the Trust Receipt Law. f. Requirement for guarantee coverage Within fifteen (15) calendar days from the date of execution of the FTR agreement, the lending bank shall submit a copy of the same to the QGFB or to the nearest office of the NFA either through personal delivery or registered mail; provided that the date of acknowledgment by any authorized representative of the Board/NFA on the copy of the agreement submitted or the date of mailing as postmarked on the envelope/registry receipt shall be considered as the date of submission. Failure to submit copy of the FTR agreement within said period shall result to the automatic revocation of the guarantee coverage under the program. dctai APPENDIX 41 NEW RULES ON THE REGISTRATION OF LONG TERM COMMERCIAL PAPERS (Appendix to Subsection 1289.6) Pursuant to Section 4(b) of the Revised Securities Act and other existing applicable laws, the Securities and Exchange Commission hereby promulgates the following New Rules and Regulations governing long term commercial papers, in the interest of full disclosure and protection of investors and lenders in accordance with the monetary and credit policies of the Central Bank: SECTION 1. Scope . These rules shall apply to long term commercial papers issued by corporations. SECTION 2. Definitions . For purposes of these Rules, the following definitions shall apply: a. Long term commercial papers shall refer to evidence of indebtedness of any corporation to any person or entity with maturity period of more than three hundred sixty-five (365) days. b. Interbank loan transactions shall refer to borrowing between and among banks and non-bank financial intermediaries duly authorized to perform quasi-banking functions. c. Issue shall refer to the creation of commercial paper and its actual or constructed delivery to the payee. d. Appraised value shall refer to the value of chattel and real property as established by a duly licensed and independent appraiser. e. Current market value shall refer to the value of securities at current prices as quoted at the stock exchanges. f. Recomputed debt to equity ratio shall refer to the proportion of total outstanding liabilities including the amount of long term commercial papers applied for and any unissued authorized commercial papers to net worth g. Specific person shall refer to a duly named juridical or natural person as an investor for its or his own account, a trustee for one or more trustors, agent or fund manager for a principal under a fund management agreement and does not include numbered accounts. h. Net worth shall refer to the excess of total assets over total liabilities, net of appraisal surplus. i. Subsidiary shall refer to a company more than fifty (50%) per cent of the outstanding voting stock of which is directly or indirectly, owned, controlled, or held with power to vote by another company. j. Affiliate shall refer to a concern linked, directly or indirectly, to another by means of: 1) Ownership, control and power to vote 10% but not more than 50% of the outstanding voting stock. 2) Common major stockholders, i.e. owning 10% but not more than 50% of the outstanding voting stock. 3) Management contract or any arrangement granting power to direct or cause the direction of management and policies. 4) Voting trustee holding 10% but not more than 50% of the outstanding voting stock. 5) Permanent proxy constituting 10% but not more than 50% of the outstanding voting stock. k. Underwriting shall refer to the act or process of distributing and selling of any kind of original issues of long term commercial papers of a corporation other than those of the underwriter itself either on guaranteed or best effort basis. l. Trust accounts shall refer to those accounts with a financial institution authorized by the Central Bank to engage in most functions wherein there is a trustor-trustee relationship under a trust agreement. SECTION 3. Conditions for Registration . Long term commercial papers shall be registered under any of the following conditions: a. Collateral The amount of long term commercial papers applied for is covered by the following collaterals which are not encumbered, restricted or earmarked for any other purpose and which shall be maintained at their respective values at all times indicated in relation to the face value of the long term commercial paper issue: 1) Securities listed on the stock exchange Current market value of 200% 2) Registered real estate mortgage Appraised value of 150% 3) Registered chattel mortgage on heavy Appraised value of 200% equipment, machinery and similar assets acceptable to the Commission and registrable with the appropriate government agency b. Financial Ratios A registrant who meets such standard as may be prescribed by the Commission based on the following complementary financial ratios for each of the immediate past three (3) fiscal years: 1) Ratio of (a) the total cash, marketable securities, current receivables to (b) the total of current liabilities; 2) Debt to equity ratio, with debt referring to all kinds of indebtedness including guarantees; 3) Ratio of (a) net income after taxes to (b) net worth; 4) Net profits to sales ratio; and 5) Such other financial indicators as may be required by the Commission. c. Debt to equity The recomputed debt to equity ratio of the applicant based on the financial statements required under Sec. 4.c. hereof shall not exceed 4:1, provided that the authorized short term commercial papers do not exceed 300% of net worth; and upon compliance with the registration requirements specified in Sec. 4. hereof. The conditions under which the commercial papers of a registrant were registered shall be strictly maintained during the validity of the Certificate of Registration. SECTION 4. Registration Requirements . Any corporation desiring to issue long term commercial papers shall apply for registration with, and submit to the Commission the following: a. Sworn Registration Statement in the form prescribed by the Commission; b. Board resolution signed by a majority of its members 1) authorizing the issue of long term commercial papers; 2) indicating the aggregate amount to be applied for; 3) stating purpose or usage of proceeds thereof; 4) providing that the registration statement shall be signed by any of the following: the principal executive officer, the principal operating officer, the principal financial officer, the comptroller or principal accounting officer, or persons performing similar functions, and 5) designating at least two senior officers with a rank of vice-president or higher or their equivalent, to sign the commercial paper instruments to be issued. c. The latest audited financial statements and should the same be as of a date more than three (3) months prior to the filing of the registration statements, an unaudited financial statement as of the end of the immediately preceding month: Provided , however , That such unaudited financial statement shall be certified under oath by the accountant and the senior financial officer of the applicant duly authorized for the purpose and substituted with an audited financial statement within one hundred five (105) days after the end of the applicant's fiscal year; d. Schedules A to L based on subsection c. above, in the form attached as Annex "A"; e. Income statements for the immediate past three (3) fiscal years audited by an independent certified public accountant: Provided , That if the applicant has been in operation for less than three (3) years, it shall submit income statements for such number of years that it has been in operation; f. An underwriting agreement for the long term commercial paper issues with an expanded commercial bank or an investment house, or any other financial institution which may be qualified subsequently by the Central Bank with minimum condition, among others, that the underwriter and the issuer shall be jointly responsible for complying with all reportorial requirements of the Commission and the Central Bank in connection with the long term commercial paper issue it being understood that the primary responsibility for the submission of the report to these regulatory agencies is upon the underwriter during the effectivity of the underwriting agreement and thereafter the responsibility shall devolve upon the issuer, Provided , however , That if the issuer is unable to provide the information necessary to meet such reportorial requirements, the underwriter shall, not later than two (2) working days prior to the date when the report is due, notify the Commission of such inability on the part of the issuer. Provided , further , That if the underwriting agreement is with a group composed of expanded commercial banks and/or investment houses or any financial institutions which may be qualified subsequently by the Central Bank, there shall be a syndicate manager acting and responsible for the group: Provided , finally , That the underwriter may be changed subject to prior approval by the Commission. g. A typewritten copy of a preliminary prospectus approved by the applicant's Board of Directors which, among others, shall contain the following: 1) A statement printed in red on the left hand margin of the front page, to wit: "A registration statement relating to these long term commercial papers has been filed with but has not yet been approved by, the Securities and Exchange Commission Information contained herein is subject to completion or amendment. These long term commercial papers may not be sold nor may offers to buy be accepted prior to the approval of the registration statement. This preliminary prospectus shall not constitute an offer to buy nor shall there be any sale of these long term commercial papers in the Philippines as such offer, solicitation or sale is prohibited prior to registration under the Revised Securities Act." 2) Aggregate maximum amount applied for, stated on the front page of the prospectus; 3) Description and nature of the applicant's business; 4) Intended use of proceeds; 5) Provisions in the underwriting agreement naming the underwriter and its responsibilities in connection with, among others, the reportorial requirements under these Rules; 6) Other obligations of the applicant classified by maturities maturing within six (6) months; from six (6) months to one (1) year; and one (1) year and past due amounts; 7) List of assets which are encumbered, restricted or earmarked for any other purposes; 8) List of directors, officers and stockholders owning 2% or more of the total outstanding voting stock of the corporation, indicating any advance to said directors, officers and stockholders; 9) List of entities where it owns more than 33-1/3% of the total outstanding voting stock, as well as borrowings from, and advances to, said entities. h. Projected annual cash flow statement presented on a quarterly basis as of the approximate date of issuance for a period co-terminus with the life time of the issue indicating the basic assumptions thereto and supported by schedules on actual maturity patterns of outstanding receivables and liabilities (under six (6) months, six (6) months to one (1) year, over one (1) year and past due accounts) and inventory turn-over. i. Data on financial indicators as may be prescribed by the Commission for each of the immediate past three (3) fiscal years such as on solvency, liquidity and profitability. The Commission may, whenever it deems necessary, impose other requirements in addition to those enumerated above. SECTION 5. Action on Application for Registration . a. Within sixty (60) days after receipt of the complete application for registration, the Commission shall act upon the application and shall in the appropriate case grant the applicant a Certificate of Registration and Authority to issue Long Term Commercial Papers valid for one year which may be renewed annually with respect to the unissued balance of the authorized amount upon showing that the registrant has strictly complied with the provisions of these Rules and the terms and conditions of the Certificate of Registration. b. The Commission shall return any application for registration, in cases where the requirements of applicable laws and regulations governing the issuance of long term commercial papers have not been complied with, or for reasons which shall be so stated. SECTION 6. Close-end Registration . Registration of long term commercial papers under these Rules shall be a close-end process whereby the portion of the authorized amount already issued shall be deducted from the authorized amount and may no longer be reissued even if reacquired in any manner, pursuant to the terms and conditions of issue. SECTION 7. Long Term Commercial Papers Exempt Per Se . The following specific long term debt instruments are exempt per se from the provisions of these Rules: a. Evidence of indebtedness arising from interbank loan transactions; b. Evidence of indebtedness issued by the national and local governments; c. Evidence of indebtedness issued by government instrumentalities the repayment and servicing of which are fully guaranteed by the National Government; d. Evidence of indebtedness issued to the Central Bank under its open market and/or rediscounting operations; e. Evidence of indebtedness issued by the Central Bank of the Philippines, Philippine National Bank, Development Bank of the Philippines, and Land Bank of the Philippines; f. Evidence of indebtedness issued to the following primary institutional lenders: banks including their trust accounts, trust companies, non-bank financial intermediaries authorized to engage in quasi-banking functions, investment houses including their trust accounts, financing companies, investment companies, non-stock savings and loan associations, venture capital corporations, special purpose corporations referred to in Central Bank Monetary Board Resolution No. 1051 dated June 19, 1981, insurance companies, government financial institutions, pawnshops, pension and retirement funds approved by the Bureau of Internal Revenue, educational assistance funds established by the national government; and other entities that may be classified as primary institutional lenders by the Central Bank, in consultation with the Commission; provided all such evidences of indebtedness shall be held on to maturity and shall neither be negotiated nor assigned to any one other than the Central Bank, and the Development Bank of the Philippines with respect to private development banks in connection with their rediscounting privileges; g. Evidence of indebtedness the total outstanding amount of which does not exceed Fifteen Million Pesos (P15,000,000.00) and issued to not more than fifteen (15) primary lenders other than those mentioned in subsection (f) above, which evidence of indebtedness shall be payable to specific persons, and not to bearers, and shall neither be negotiated nor assigned but held on to maturity; Provided , That the aggregate amount of P15,000,000.00 shall include outstanding short term commercial papers; Provided , further , That in reckoning compliance with the number of primary lenders under this Section, holders of such papers exempt under Sec. 4(f) of the Rules on Registration of Short Term Commercial Papers, as amended, shall be counted; Provided , furthermore , That such issuer shall: 1) File (1) a disclosure statement prior to the issuance of any evidence of indebtedness; and (2) a quarterly report on such borrowings in the forms prescribed by the Commission; and 2) Indicate in bold letters on the face of the instrument the words "NON-NEGOTIABLE, NON-ASSIGNABLE"; and Provided , finally , That any issuer in accordance with the Rules on Registration of Long Term Commercial Papers and Bonds dated October 15, 1976 and with outstanding long term commercial papers falling under this subsection as of the effectivity date hereof, shall likewise file the prescribed disclosure statement and the quarterly report on such borrowings; h. Evidence of indebtedness denominated in foreign currencies, and i. Evidence of indebtedness arising from bona fide sale of goods or property. SECTION 8. Other Long Term Commercial Papers Exempt from Registration . The following long term commercial papers shall be exempt from registration under Secs. 3 and 4 hereof, but shall be subject to the payment of the exemption fee as prescribed under Section 14 and to the reportorial requirements under Section 15 of these Rules; a. Long term commercial papers issued by a financial intermediary authorized by the Central Bank to engage in quasi-banking functions; b. Long term commercial papers fully secured by debt instruments of the National Government and the Central Bank of the Philippines and physically delivered to the trustee in the Trust Indenture. SECTION 9. Prohibitions . a. No long term commercial papers shall be issued or negotiated or assigned unless the requirements of these Rules shall have been complied with: Provided , That no registered long term commercial paper issuer may issue long term commercial paper exempt per se under Section 7(g) hereof. b. There shall be no pretermination of long term commercial papers either by the issuer or the lender within 730 days from issue date. Pretermination shall include optional redemption, partial installments and amortization payments; however, installment and amortization payments may be allowed if so stipulated in the loan agreement. SECTION 10. Compliance with Central Bank Quasi-Banking Requirements . Nothing in these Rules shall be construed as an exemption from or a waiver of, the applicable Central Bank rules and regulations governing the performance of quasi-banking functions. Any violation of said Central Bank rules and regulations shall be considered a violation of these Rules. SECTION 11. Conditions of the Authority to Issue Long Term Commercial Papers . a. During the effectivity of the underwriting agreement, should the issuer fail to pay in full any interest due on, or principal of, long term commercial paper upon demand at stated maturity date, the authority to issue long term commercial papers shall be automatically suspended. The underwriter shall, within the next working day, notify the Commission thereof and the Commission shall forthwith issue a formal Cease and Desist Order enjoining both the issuer and the underwriter from further issuing or underwriting long term commercial papers. b. Upon the expiration of the underwriting agreement, it shall be the responsibility of the issuer to notify the Commission that it failed to pay in full any interest due on, or principal of, long term commercial paper upon demand at stated maturity date and has accordingly automatically suspended the issuance of its long term commercial papers. Within the next working day, the Commission shall forthwith issue a formal Cease and Desist Order enjoining the issuer from further issuing long term commercial papers. c. Whenever necessary to implement the monetary and credit policies promulgated from time to time by the Monetary Board of the Central Bank, the Commission may suspend the authority to issue long term commercial paper, or reduce the authorized amount thereunder, or schedule the maturities of the registered long term commercial paper to be issued. SECTION 12. Basic Features of Registered Commercial Papers . a. All registered commercial paper instruments shall have a standard format, serially pre-numbered, and denominated. The instrument shall state, among others, the debt ceiling of the registrant and a notice that information about the registrant submitted in connection with the registration and other reportorial requirements from the issuer is available at the Commission and open to public inspection and that the issuer is not authorized by the Central Bank to perform quasi-banking functions. b. A specimen of the proposed commercial paper instrument shall be submitted to the Commission for approval of the text thereof. c. The instrument approved by the Commission shall be printed by an entry authorized by the Commission and shall be released by the Commission to the issuer. SECTION 13. Minimum Principal Amount . The minimum principal amount of each registered long term commercial paper instrument shall not be lower than the amounts indicated in the following schedule: a. Up to two years P100,000.00 b. Over two years but less than four years 50,000.00 c. Four years or more 20,000.00 SECTION 14. Fees . Every registrant shall pay the following fees: a. Upon application for registration, a filing fee of 1/20 of 1% based on total commercial paper proposed to be issued, but not to exceed P75,000.00. b. For issuers of commercial papers exempt under Section 8 hereof, an annual exemption fee of P10,000.00. SECTION 15. Periodic Reports . a. Issuers of registered long term commercial papers through their underwriters and those exempt under Section 8 hereof shall submit the following reports in the form prescribed by the Commission: 1) Monthly reports on long term commercial papers outstanding as at the end of each month, to be submitted within ten (10) working days following the end of the reference month. 2) Quarterly reports on long term commercial paper transactions accompanied by an interim quarterly financial statement to be submitted within thirty (30) calendar days following the end of the reference quarter; and 3) Actual quarterly cash flow statement to be submitted within ten (10) working days following the end of the reference quarter. b. These periodic reports shall be signed under oath by the corporate officers authorized pursuant to a board resolution previously filed with the Commission. c. Issuers whose offices are located in the provinces may, through their underwriters, submit their report to the nearest extension office of the Commission. SECTION 16. Administrative Sanctions . If the Commission finds that there is a violation of any of these Rules and Regulations and implementing circulars or that any issuer, in a registration statement and its supporting papers, as well as in the periodic reports required to be filed with the Commission and the Central Bank, has made any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or refuses to permit any lawful examination into its corporate affairs, the Commission shall in its discretion, impose any or all of the following sanctions: a. Suspension or revocation, after proper notice and hearing, of the Certificate of Registration and Authority to Issue Commercial Paper ; b. A fine in accordance with the guidelines that the Commission shall issue from time to time: Provided , however , That such fine shall in no case be less than P200.00 nor more than P50,000.00 for each violation plus not more than P500.00 for each day of continuing violation. Annex "B" hereof shall initially be the guidelines on the scale of fines. c. Other penalties within the power of the Commission under the existing laws; and d. The filing of criminal charges against the individuals responsible for the violation. SECTION 17. Cease and Desist Order . a. The Commission may, on its own motion or upon verified complaint by an aggrieved party, issue a Cease and Desist Order ex-parte, if the violation(s) mentioned in Section 16 hereof may cause great or irreparable injury to the investing public or will amount to palpable fraud or violation of the disclosure requirements of the Revised Securities Act and of these Rules and Regulations. b. The issuance of such Cease and Desist Order automatically suspends the Authority to issue Long Term Commercial Paper. c. Such Cease and Desist Order shall be confidential in nature until after the imposition of the sanctions mentioned in Section 16 hereof shall have become final and executory. d. Immediately upon the issuance of an ex-parte Cease and Desist Order, the Commission shall notify the parties involved and schedule a hearing on whether to lift such order or to impose the administrative sanctions provided for in Section 16 not later than fifteen (15) days after receipt of notice. SECTION 18. Repealing Clause . These Rules and Regulations supersede the Rules on Registration of Long Term Commercial Paper and Bonds dated October 15, 1976 and all the amendments to said Rules except as provided in Section 19 hereof. All other rules, regulations, orders, memoranda circular of the Commission which are inconsistent herewith are likewise hereby repealed or modified accordingly. SECTION 19. Transitory Provision . a. Any authority or Certificate of Exemption to Issue Long Term Commercial Papers, granted under the Rules on Registration of Long Term Commercial Papers dated October 15, 1976, valid and subsisting as of the date of the effectivity of these Rules shall remain valid with respect only to all outstanding issues until such issues are retired or redeemed. b. The Commission may, at its discretion and subject to such conditions it may impose, authorize issuance of any unissued portion of the issuer's approved long term debt ceiling solely for refinancing of maturing long term commercial paper issue for a period not beyond fifteen (15) months from the effectivity date of these Rules. cdlex SECTION 20. Effectivity . These Rules and Regulations shall take effect fifteen (15) days after publication in two newspapers of general circulation in the Philippines. Mandaluyong, Metro Manila, Philippines. May 17, 1984. (SGD.) MANUEL G. ABELLO Chairman Securities and Exchange Commission APPROVED: (SGD.) JOSE B. FERNANDEZ, JR. Chairman Monetary Board of the Central Bank of the Philippines (SGD.) CESAR E. A. VIRATA Minister Ministry of Finance APPENDIX 42 LIST OF RESERVE ELIGIBLE AND NON-ELIGIBLE SECURITIES (Appendix to Sec. 1254b(2) A. Government securities ELIGIBLE as reserves I. Direct obligations of the Government of the Republic of the Philippines eligible as reserve against peso deposit liabilities and deposit substitute liabilities: LLjur 1.1. 2% PWED Bonds Loan of 1976/86 232nd Series 1.2. 4% PWED Bonds all outstanding series 2.1 4% NPC Bonds (8th to 50th Series except 29th S which bear 6% obligation assumed by the National Government) 3.1 4% Treasury Bonds 30th; 57th; 59th 71st; 73rd 93rd S 3.2. Treasury Bonds with less than 4% per annum interest considered eligible by reason of expressed CB limited support to original purchaser: 2% T/Bond L of 1973/2003 1st Series (1st Rel. & 2nd Rel.) 3% T/Bond L of 1978/2008 55th Series (1st Rel.) 3% T/Bond L of 1979/2009 55th Series (2nd Rul.) 3-1/4% T/Bond L of 1974/1999 6th Series (1st and 2nd Rel.) 3-1/4% T/Bond L of 1978/2003 54th Series (1st, 2nd & 3rd Rel.) 4.1. 4% Treasury Notes L of 1980/1995 115th Series 4.2. Treasury Notes carrying less than 4% per annum interest considered eligible by reason of CB-support given and pursuant to MBR 2224 dated December 3, 1982 authorizing the replacement of reserved securities earning less than 4% by reserve eligible T/Bonds earning a standard rate of 4% per annum; 2% T/Notes L of 1975/85 63rd Series, 64th Series, 66th & 67th Series 5.1. PREMYO SAVINGS BONDS (Regular Series) Subject to percentage phase out. 6.1 PREMYO SAVINGS BONDS (Biglang Bahay Series) likewise subject to percentage phase-out. 7.1 Bonds made specifically eligible to its holders only: 4% Treasury Capital Bonds DBP only 4% Capital Treasury Bonds PNB only II. Bonds and other evidences of indebtedness bearing interest rate of four (4%) per cent per annum, issued by government-owned or controlled corporations, political subdivisions and instrumentalities likewise eligible as reserves against peso deposit liabilities and deposit substitute liabilities . 1.1. 4% NAWASA Bonds , 1st to 9th & 13th Series III. The following government securities (including CBCIs 8th and 9th Series) bearing more than four (4%) per cent per annum interest, whether Central Bank supported or not; if BEING USED BY BANKS/NBQBs as reserve against deposit substitute liabilities as of January 17, 1977 shall continue to be eligible as such; provided, that whenever said securities shall have matured, they shall be replaced by securities carrying the features/conditions enumerated under Circular No. 638, dated November 8, 1978, as amended: 6% PWED Bonds All outstanding issues 6% NPC Bonds -do- 7% NPC Bonds -do- 8-1/2% NPC Bonds 13th 2nd Series 7% NPC Capital Bonds 7th 9th Series 7% MWSS Capital Bonds All outstanding issues 6% NIA Bonds -do- 4-1/2% Treasury Bonds 7th Series 4-7/10% Treasury Bonds 9th Series 5 Treasury Bonds 9th Series 6th Treasury Bonds 8th Series 7th Treasury Bonds All outstanding issues, except 15th Series 10-3/4% Treasury Bonds All outstanding issues 9% Treasury Notes 60th and 65th Series 10-1/2% Treasury Notes 101st Series (1st & 2nd Rel.) 10-3/4% Treasury Notes 56th and 61st Series 11-3/4% Treasury Notes 59th Series 6% NAWASA Bonds 11th, 12th, and 1st Series 10% EPZA Bonds 9th 11th Series 10-3/4% EPZA Bonds 3rd 8th Series B. The following government securities are NOT ELIGIBLE whatsoever for reserve purposes: Negotiable Land Certificate (NLC) Cultural Center of the Philippines (CCP) Bonds Philippine Charity Sweepstakes Office (PCSO) Bonds Public Estate Authority (PEA) Bonds National Development Company (NDC) Bonds National Housing Authority (NHA) Bonds National Food Authority (NFA) Bonds NHMTC Bahayan Certificates Light Rail Transit Authority (LRTA) Notes CBCIs (Auctioned/discounted) 24th 29th Series CBCIs (Negotiated) A to D-1 Series and 5th to 7th Series (18 months) CBCIs 10-1/2% Special Series 1st-32nd Series Central Bank Bills (Negotiated/discounted) Treasury Bills (Negotiated/discounted) Treasury Notes and Treasury Bonds bearing less than four (4%) per cent per annum, but not given CB support as follows: Treasury Bonds 2% T/Bond L of 1973/2003 4th Series 2-3/4% T/Bond L of 1974/1986 7-A & 7-B Series 3% T/Bond L of 1976/2001 26th, 27th, 31st-34th, 46th & 47th Series 3% T/Bond L of 1977/2002 49th Series 3-1/4% T/Bond L of 1974/1999 6th Series 3rd and 4th Release 3-1/4% T/Bond L of 1977/2002 6th Series 5th Release 3-1/4% T/Bond L of 1975/2000 21st Series 1st Release 3-1/4% T/Bond L of 1977/2002 21st Series and Release 3-1/4% T/Bond L of 1977/2002 51st Series 1st & 2nd Release 3-1/4% T/Bond L of 1978/2003 54th Series 1st & 3rd Release 3-1/4% T/Bond L of 1980/2005 58th Series 3-3/4% T/Bond L of 1973/2003 2nd Series Treasury Notes 2% T/Notes L of 1976/1991 79th Series 3% T/Notes L of 1982/1997 128th Series 3% T/Notes L of 1981/1986 120th Series & 125th Series 3-1/2% T/Notes L of 1982/1997 Special Series 1st-24th Release ( Effective July 8, 1985 ) APPENDIX 43 REVENUE REGULATIONS NO. 1-85 SUBJECT : Amendment of the penalties stipulated in the Agreement prescribed in Revenue Regulations 5-84. TO : All Officials Concerned of the Bureau of the Treasury, Bureau of Internal Revenue and Accredited Banks. Paragraph 8 of the bank's obligation in the Agreement prescribed in Revenue Regulations No. 5-84 which took effect on May 29, 1984 is hereby amended to read as follows: (8) pay a fine of P100.00 for every day of delay in the submission of each required report or the submission of inaccurate or incomplete report; likewise, a 25% surcharge on late remittance of and/or unremitted collections to be annualized which when added to the interest rate of 1/10 of 1% interest rate per day thereon as provided for under paragraph 4 of this Agreement shall not be less than the prevailing inter bank borrowing rate plus 5% , except if the delay or failure to remit on time is due to fortuitous events. LLphil This Amendment shall take effect immediately. (SGD.) CESAR E. A. VIRATA Minister of finance RECOMMENDING APPROVAL: (SGD.) RUBEN B. ANCHETA Acting Commissioner TAN-A5239-J1139-A-D VESTING THE BIR THE AUTHORITY TO COLLECT TAXES THROUGH THE BANKING SYSTEM SUBJECT : Implementation of Executive Order No. 937 dated March 1, 1984 vesting in the Bureau of Internal Revenue the primary responsibility of Enforcing the Collection of National Internal Revenue Taxes through the Banking System. All Officials Concerned of the Central Bank of the Philippines, Bureau of Treasury, Bureau of Internal Revenue and Accredited Banks. SECTION 1. Scope . Pursuant to the provisions of E.O. 937, dated March 1, 1984, these regulations are promulgated to prescribe the rules, guidelines and procedures to effectively implement the utilization of the banking system in receiving and accounting for internal revenue tax payments. SECTION 2. Criteria for the selection of banks and the conditions under which they may be accredited or authorized to collect internal revenue taxes . In general, all commercial and specialized government banks (DBP, Land Bank, Amanah Bank) may be accredited or authorized to collect internal revenue taxes, provided they qualify under the criteria and the conditions stated hereunder. Thrift banks, private development and/or rural banks may be authorized to collect internal revenue taxes only in places where there are no commercial, and specialized government banks serving in such places. However, those thrift banks, private development banks and stock savings and loan associations which were previously authorized to collect internal revenue taxes and have not committed any infractions of CB Circular 844 and 904 and other pertinent issuances, may apply for accreditation under these regulations. The Bureau of Internal Revenue shall accredit or authorize any bank to collect internal revenue taxes under the following conditions: 1. The bank shall file an application for accreditation. Banks applying for accreditation as authorized bank for the collection of internal revenue taxes may file their applications with the Collection Office of the Bureau of Internal Revenue or through the Revenue Regional Director of the Regional offices of the Bureau. 2. The application shall be in writing and shall contain the following information: a. Kind of bank, capitalization, and list of officers and members of the Board of Directors. b. List of addresses of the Head Office/Branches/Extension Offices/Agencies which the bank wish to include in the accreditation. The Office/Branch/Extension Office/Agency that can put up a tellering booth where space can be provided for by revenue offices, or which Head Office/Branch/Extension Office/Agency can provide office space in their respective offices for which internal revenue officers may hold office, free of charge, shall be indicated in the List. c. Sample specimen of the signature of the bank officials authorized to requisition Confirmation Receipts from the Bureau of Internal Revenue. d. Sample specimen signature of the bank officials authorized to sign collection reports (BIR Forms 12.55 to 12.58). e. The names of bank officials duly authorized to deal with the officials and employees of the Bureau of Internal Revenue on problems relevant to its collection of internal revenue taxes. 3. The bank, shall, upon approval of its application, execute an agreement with the Bureau of Internal Revenue in the prescribed format attached as Annex "A" and which forms an integral part hereof. SECTION 3. Records to be kept by Banks . Accredited Banks shall keep and maintain the following records which shall be made available for inspection and audit by duly authorized BIR officers and agents: A. COLLECTING BANK OFFICES (head office/branches/agencies/extension offices) A. "Special Cash Book" which shall indicate the following: a. Date of collection b. Inclusive serial numbers of CRs issued c. Report name and control number (BIR Form No. 12.56/BIR Form No. 12.50) d. Amount of collection (Due the Central Bank Collections) e. Amount of dishonored checks f. Date report was submitted to BIR B. BANK HEAD OFFICES In addition to the "Special Cash Book" required above, head offices of accredited banks shall keep and maintain a "Record of Consolidated Collections and Remittances" showing the following: aisadc a. Date of collection b. Name/Location of Collecting Offices (including H.O.) c. BIR Form 12.56 Control Number d. Inclusive CR Numbers e. Amount Due the Central Bank (amount indicated Form 12.56) f. Amount reported per BIR Form No. 12.55 g. Difference between 12.56 and 12.55 h. Date of CB-Debit Advice (regular collection) i. Amount of CB-Debit Advice (regular collection) j. Date of CB-Debit Advice other than Remittance of Collections k. Amount of CB-Debit Advice other than Remittance of Collections l. BIR Form 12.50 Control Number m. Amount of Returned/Dishonored Checks (amount indicated in 12.58) n. Date of CB-Credit Advice on adjustments o. Amount of CB-Credit Advice on adjustments SECTION 4. Refund . Banks shall not refund to any taxpayer amounts collected for which a confirmation receipt has been issued. Overpayment and/or erroneous payment of internal revenue taxes shall be determined and refunded by the Commissioner of Internal Revenue in accordance with existing laws, rules and regulations. SECTION 5. Responsibilities of offices involved in the collection of national internal revenue taxes thru the Banking system . Pursuant to Executive Order No. 937, Series of 1984, the Central Bank of the Philippines, the Bureau of Internal Revenue and the Bureau of Treasury shall assume the responsibilities indicated hereunder to insure the effectiveness of the collection system. A. The Central Bank of the Philippines shall Act as a clearing house for a accredited banks, the Bureau of the Treasury and the Bureau of Internal Revenue in the implementation of the collection of internal revenue taxes through the banking system. As such it shall: 1. Accept remittances of any accredited bank by debiting its demand deposit account upon proper advice of said bank, and credit the Special Account of the Treasurer of the Philippines BIR Collections. In no case shall amounts earmarked by accredited banks for remittance of tax collections be used for any other purposes; 2. debit the demand deposit account of an accredited bank for the amount of its unremitted collections or adjustments and credit the Special Account of the Treasurer of the Philippines-BIR Collections, upon advise of the Commissioner of Internal Revenue; 3. debit the demand deposit account of an accredited bank for penalties, surcharges and interest due on delayed remittance of tax collections upon advise by the Commissioner. Penalties, surcharges and interest so debited shall be properly identified and segregated from other BIR Collections when credited to the Special Account of the Treasurer; 4. debit or credit the demand deposit account of accredited banks for adjustments of remittances also upon advise by the Commissioner and correspondingly debit or credit the Special Account of the Treasurer of the Philippines BIR Collections; 5. furnish the Bureau of Internal Revenue and the Bureau of the Treasury with copies of the debit/credit advise the day following the debit/credit to the accredited bank's demand deposit account; 6. send the debit/credit advice to the affected accredited bank the day following the debit/credit to the bank's demand deposit account where the debit or credit was made upon the advise of the Commissioner. B. The Bureau of Internal Revenue shall 1. furnish CB and BTR with a list of accredited banks, including their respective code numbers; 2. provide confirmation receipts for the use of accredited banks; printing costs of confirmation receipts and payment orders shall be assumed by the BIR upon full utilization of the present stock of these forms including those that have been ordered as of June 30, 1984; 3. account for and monitor tax collections and remittances of accredited banks; 4. furnish BTR with monthly reports of collection and remittances as recorded in the books of BIR, the statement of monthly collections shall be classified by revenue source in accordance with the CFS Classification; 5. communicate to accredited banks their delayed or unremitted collections, delayed or erroneous reports, penalties, surcharged and interest due, and discrepancies discovered including the resulting adjustments made; 6. furnish the BTR with copies of communications to banks on adjustments, delayed remittances, penalties, surcharges and interest imposed; 7. advise the Central Bank thru its Accounting Department to debit the accredited bank's demand deposit account for the amounts of unremitted collections, adjustments, penalties, surcharges and interests; 8. advise CB to debit or credit the Demand Deposit Account of the accredited bank with any necessary adjustments such as erroneous or double reporting of remittance on internal revenue collections and correspondingly debit or credit the account of the Treasurer of the Philippines for the same amounts; 9. furnish Bureau of the Treasury with advices to CB on adjustments to the demand deposit accounts of accredited banks which shall affect the account of the Treasurer of the Philippines-BIR Collections such as those mentioned in No. 8 above; 10. institute civil and criminal actions when warranted against accredited banks and/or their officials for infraction of the agreement between BIR and the accredited bank and the attendant rules and regulations; 11. take action on the Bank's property assigned to the BIR in case of default in the remittance of internal revenue tax collections if the bank's demand deposit account is not sufficient to satisfy the unremitted collections, accrued penalties, interests and surcharges; and 12. suspend the authority of accredited banks to collect internal revenue taxes, for cause. C. The Bureau of the Treasury shall 1. agree to the automatic credit of its Special Account, BIR Collections with CB for remittances of tax collections by accredited banks and automatic debits of the same account for adjustments such as double remittance by accredited banks and the like as advised by the BIR; 2. record in a Special Account in the General Fund the amount of penalties, surcharges and interest collected from accredited banks for violations of the rules and regulations issued on collection of internal revenue taxes; 3. advise BIR of discrepancies with their records on the following statements and communications furnished them by the BIR: a) statement of collection and remittances; and b) copies of communication to accredited banks on delayed or unremitted tax collection, penalties, surcharges and interests imposed, and any adjustments affecting its Special Account-BIR Collections. SECTION 6. Disposition of Penalties Collected . Penalties including surcharges and interest shall accrue to a Special Account in the general fund for the use of the Bureau of Internal Revenue in furtherance of its Collection functions. prcd SECTION 7. Transitory Provisions . All banks presently authorized to collect internal revenue taxes may continue to do so up to June 30, 1984, after which they shall automatically cease to collect internal revenue taxes unless accredited thereafter, likewise, all these banks shall submit an inventory of all CRs in their possession as of May 31, 1984 and a final inventory as of June 30, 1984. These inventories of Confirmation Receipts shall be submitted to the BIR, Collection Office on June 15, 1984 and July 10, 1984 respectively. SECTION 8. Repealing Clause . All provisions of existing issuances which are inconsistent herewith are hereby revoked. SECTION 9. Effectivity . These regulations shall take effect upon approval. (SGD.) CESAR E. A. VIRATA Minister of Finance RECOMMENDING APPROVAL: (SGD.) RUBEN B. ANCHETA Acting Commissioner Date Approved: May 29, 1984 RULES & REGULATIONS ON THE COLLECTION OF INTERNAL REVENUE TAXES THROUGH THE BANKING SYSTEM Requisition and Distribution of Confirmation Receipt (CR) Booklets The Head Office of Accredited Banks shall 1. Requisition Confirmation Receipt booklets for the use of all its collecting offices (including head office, branches, agencies, extension offices) from the Accountable Forms Division of the Bureau of Internal Revenue (BIR) using BIR Form 12.59. The requisition shall first be presented to the Collection Office for approval. 2. Distribute these Confirmation Receipt booklets to all its collecting offices according to pre-determined needs. 3. Submit to the BIR a monthly report on BIR Form 12.50 on its requisition of CR booklets and the distribution of the same to all its collecting offices within three days after the end of each month. 4. Insure that all its collecting offices are amply provided with CR booklets at all times, so that collection of taxes will not be impaired because of lack of confirmation receipts. 5. Report to the BIR Collection Office immediately upon discovery losses of Confirmation Receipts and publish the fact of loss in the manner required under No. 7 of the Bank's commitments in the Agreement. Collection and Reporting of Internal Revenue Payments Banks accredited to accept payment of internal revenue taxes shall 1. acknowledge receipt of internal revenue tax payments by issuing Confirmation Receipts. In no case shall a bank accept internal tax payments without the presentation of a duly issued Payment Order by the BIR. 2. install a "Special Cash Book" exclusively for Internal Revenue collections where their daily collections shall be recorded. 3. The Collecting Office (Branch/Extension Office/Agency) shall a) report by telephone, telex or other means to its Head Office, at the end of each day, total collections for the day and the inclusive serial numbers of CRs issued, to be used as basis for the preparation by their respective Head Office of Consolidated Report on Daily Collections of Internal Revenue Taxes (formerly RC Form No. 82-001 now BIR Form No. 12.55) b) accomplish the Abstract of Daily Collections of internal Revenue Taxes (formerly RC Form No. 82-002, now BIR Form No. 12.56) and submit the same duly supported with copies of Payment Orders (PC) and Confirmation Receipts (CRs) within ten (10) days from date of collection to the offices indicated in the form. The abstract of daily collections of Internal Revenue Taxes shall show in numerical sequence the serial numbers of CRs issued, including those which were cancelled or missing. All CRs in a booklet must be accounted for as issued, cancelled or missing. All copies of CRs issued and cancelled, shall be attached to this report, not in a separate report. c) report and transmit immediately to their respective Head Offices returned/dishonored checks which shall be the basis in the preparation of the report on dishonored checks (formerly RC Form No. 82-004 nor BIR Form No. 12.58). 4. The Head Office of the Collecting Bank shall a) consolidate its report of collection with those of the branches/extension offices/agencies and submit to the BIR Receiving Unit, CB complex, the Consolidated Report of Daily Collection of Internal Revenue Taxes (formerly RC Form No. 82-001 now BIR Form No. 12.55) within (3) days following the date of collection. The consolidated report of Daily Collections of Internal Revenue Taxes shall list all its authorized collecting offices to insure that every such office is included in the report, whether or not it has received tax payments for that date. b) submit directly to the Revenue Accounting Division, BIR, Diliman, Quezon City, all returned or dishonored checks the day following receipt of such checks. Prepare the Report on Returned/Dishonored Checks (formerly RC Form No. 82-004 now BIR Form No. 12.58) in time for acknowledgment of receipt by the Revenue Accounting Division of BIR of the returned/dishonored checks on the report itself. c) consolidate the Abstract of Daily Collection of Internal Revenue Taxes (formerly RC Form No. 82-002 now BIR Form No. 12.56) with those received from branches/extension offices/agencies in the Consolidated Abstract of Collection of Internal Revenue Taxes (formerly RC Form No. 82-003 now BIR Form No. 12.57). Copies of the consolidated abstract shall be attached to the corresponding copy of the Authority To Debit Demand Deposit Account (BIR Form 12.57A). The original copies of BIR Forms 12.57 and 12.57A shall be submitted to the Accounting Department, Central Bank of the Philippines, Manila, on the eleventh (11th) Calendar day following the date of collection. Simultaneously the remaining copies of both forms, with the supporting POs and CRs shall be submitted to the Offices indicated in the forms. llcd d) report on BIR Form 12.57 total gross collection for the day without deducting the following: 1. the amount of dishonored checks, as the same shall be reflected as a deduction from the collections of the day, in the Authority issued by Accredited Banks on BIR Form No. 12.57A. Such deduction shall be allowed only when BIR has acknowledged receipt of dishonored checks as required in (b) above. 2. any adjustment on the amount reported in BIR Forms 12.55, 12.56 and 12.57 as the same shall be credited to or debited against their Demand Deposit Account upon the advice by the BIR after proper verification of the pertinent reports. e) submit only one supplementary report on BIR Forms No. 12.55 or 12.57 (formerly RC Form No. 82-001 and 82-003) for each date of collection for reports of branches or extension offices received by Head Office after the corresponding Consolidated Report for any date of actual collection has been submitted. The word "SUPPLEMENTAL" shall be indicated in bold letters to wit: April 15, 1984 SUPPLEMENTAL Date of Collection The reason or reasons for the delay in the submission of the report shall likewise be stated in the supplemental report for the purpose of determining appropriate action on the matter. f) inform the Bureau if there is no collection on any given date by stating in the next subsequent report of collection that no tax payments were received on such specified date/s. g) provide control numbers to all collection reports (BIR Form 12.55 to 12.60) prior to submission to the BIR. III. Recording and Maintenance of "Special Cash Book BIR" and "Record of Consolidate Collections and Remittances" Bank Collecting Offices, including the Head Office shall 1. record daily in its "Special Cash Book" the total daily collection using as basis BIR Form No. 12.56, as required in Sec. 3A of Revenue Regulations No. ________: 2. record daily or as necessary in its "Special Cash Book" the total amount of dishonored checks; 3. foot the "Special Cash Book" monthly. The Bank Head Office shall 1. record daily in its "Record of Consolidated Collections and Remittances" as required in Sec. 38 of Revenue Regulations No. _______ a) its total daily collection and that of each of its collecting offices as reported in BIR Form 12.56; b) the total amount of collection of each of its collecting offices, as reported in BIR Form 12.55; c) the total amount of its dishonored checks; and that of each of its collecting offices; d) the total amount debited by the Central Bank against its Demand Deposit Account as evidences by CB-Debit Advice; e) the total amount credited by the Central Bank to its Demand Deposit Account as evidenced by CB-Credit Advice. 2. indicate the causes of the discrepancies between 12.56 and 12.55 with a footnote. 3. foot the pertinent columns of "Record of Consolidated Collections and Remittances" daily. 4. indicate on the last page of the daily record, right below the total of 12.56, the control number of BIR Form 12.57 where subject collection was reported and the date when such report was submitted to the BIR and the Central Bank. 5. add the daily totals of the pertinent columns of the "Record of Consolidated Collections and Remittances" at the end of each month. 6. indicate the totals arrived at on the second line immediately after the date when the last 12.57 report was submitted to the BIR. 7. double rule the totals indicated in No. 6 above. AGREEMENT The BUREAU OF INTERNAL REVENUE, known hereinafter as the BIR, represented by Acting Commissioner Ruben B. Ancheta, Commissioner of Internal Revenue, National Office Building, Diliman Quezon City and _______________________ represented by ________________, President, known hereinafter as the Bank, after having been accredited and authorized to receive and collect internal revenue taxes, do hereby agree on the following: The Bank shall (1) acknowledge receipt of internal revenue tax payments by issuing confirmation receipts; in no case shall the Bank accept payment without the payment order duly issued by the BIR; (2) book all such collections and credit same to the Special Account "Due to Central Bank Bureau of Internal Revenue"; (3) accomplish and submit collection reports as required by the rules and regulations hereto attached as Annex "A" and shoulder the cost of report forms prescribed therein; (4) authorize the Central Bank of the Philippines, Manila, thru its Accounting Department, to debit its demand deposit accounts maintained therein for the total daily collection which is due for remittance on the 11th calendar day after the date of collection, such amount debited shall be credited to the "Special Account BIR Collections" of the Treasurer of the Philippines; and agree in case of non-remittance, for the BIR to advise the Central Bank to debit the amount of unremitted collections including penalties, surcharge and interests against the bank's demand deposit accounts; (5) maintain adequate balance in their demand deposit account for their daily remittance of tax collections; and inform Central Bank that such balance is earmarked for the remittance of tax collections; (6) keep and maintain record solely for internal revenue collections specified in the regulations which shall be made available for inspection and audit by duly authorized BIR officers and agents; (7) account for all confirmation receipts requisitioned and in case of loss, to submit to the BIR sworn statement of the fact of loss together with the proof of publication thereof in three (3) newspapers of general circulation for (3) consecutive weeks; the costs of such publication shall be for the account of the bank; and in the event the lost receipts will surface, the bank will be held responsible to the extent that the government is prejudiced; (8) pay a fine of P100.00 for every day of delay in the submission of each required report or the submission of inaccurate or incomplete report; likewise, a 24% surcharge on late remittance of and/or unremitted collections plus 1/10 of 1% interest per day thereon as provided for under paragraph 4 of this Agreement except if the delay or failure to remit on time is due to fortuitous events; (9) transmit returned or dishonored checks to the BIR the amounts of which shall be deducted from the gross collections on the day such checks were received; (10) abide with the rules and regulations promulgated by the BIR in connection with this authority and those that may be promulgated thereafter. (11) construct tellering booths within the BIR premises whenever possible at the Bank's expense; (12) educate and inform the bank's officers and employees charged with tax collection functions on the terms of this Agreement and the rules and regulations relative to the collection of internal revenue taxes; and be responsible pecuniary for any misdemeanor of its officers and employees committed in connection with this functions; (13) communicate to the BIR any changes in the information stated in the application; and (14) assign to the BIR so much of its rights to property, real and personal, in case of default in the remittance of internal revenue collections, if the bank's demand deposit accounts are not sufficient to satisfy the unremitted collections, penalties, interests and surcharges; The BIR shall (1) provide confirmation receipts for the use of the Bank; (2) reconcile the amount collected with that remitted; (3) request the Central Bank thru its Accounting Department to debit the amount of unremitted collections plus penalties surcharges and interest against the banks demand deposit accounts; (4) advise CB to debit or credit the demand deposit accounts of the accredited bank with any necessary adjustments such as erroneous or double reporting of remittance of internal revenue collections and correspondingly debit or credit the account of the Treasurer of the Philippines for the same amounts; (5) institute civil and criminal actions arising from the delayed submission or non-submission of reports and non-remittance of collections; (6) take action on the Bank's property assigned to the BIR in case of default in the remittance of internal revenue collections, if the bank's Demand Deposit Accounts are not sufficient to satisfy the unremitted collections, penalties, interests and surcharges; and (7) suspend the authority to collect internal revenue taxes or terminate this Agreement in case of violations thereof and of the rules and regulations pertinent thereto and for any of the grounds provided in the Civil Code. The parties recognize that this Agreement does not extinguish other liabilities under existing laws and that payment of interests, penalties or surcharges on account of delayed remittance of tax collections or acquiescence of BIR on any infraction of these regulations, the Agreement or any other pertinent law or regulation shall not be construed as a waiver of any civil, criminal or administrative liability. This Agreement is effective for a period of one (1) year from the date hereof, renewable annually unless sooner terminated by either party. IN WITNESS WHEREOF, we sign this Agreement this _________ day of _________, 1984 at _____________________________. (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue By: President ACKNOWLEDGEMENT REPUBLIC OF THE PHILIPPINES) CITY OF ____________________) S.S. In the Municipality/City of ________, on the day of _________, 1984, personally appeared before me, ___________ who represents that he is the president of the corporation described and named in the foregoing instrument of Agreement, and that he was duly authorized by the board of directors to execute said instrument, known to me to be the same person who executed said instrument on behalf of the corporation named therein, and he acknowledged to me that the same is the free act and deed of said corporation. The Residence Certificate of said _____________ and the Residence Certificate of the ___________ corporation were exhibited to me, and the same being No. A _____________ issued at __________ on _______, 19 ___, and No. C- __________, issued at __________ on _______, 19 ____. IN WITNESS WHEREOF, I have hereunto set may hand and seal this ____ day of ________, 1984 _________. aisadc NOTARY PUBLIC Until December 31, 19 __ Doc. No. ______ Page No. ______ Book No. ______ Series of 19 ____ REPUBLIC OF THE PHILIPPINES) CITY OF ____________________) S.S. In the Municipality/City of __________ on the ______ day of _______, 1984, personally appeared before me, Ruben B. Ancheta, Acting Commissioner of Internal Revenue, who is the same person named in the foregoing Agreement, known to me to be the same person who executed said instrument on behalf of the Bureau of Internal Revenue and acknowledged to me that the same is his free act and deed. The Residence Certificate of said Acting Commissioner of Internal Revenue was exhibited to me, and the same being No. ____________ issued at __________ on ________, 1981. IN WITNESS WHEREOF, I have hereunto set my hand and seal this _________ day of ____________, 1984. LexLib NOTARY PUBLIC Until December 31, 19 ___ Doc. No. _______ Page No. _______ Book No. _______ Series of 19 _____ Book I SUBJECT INDEX (References are to section/subsection numbers and appendices) Acceptances prohibited as deposit substitute instrument, 1281.1 Accrued Interest Income accrual of, 1303.6; 1304.3 exclusion for cash dividend, 1136.1(b) prior to renewal/extension of loan. 1304.4 Advertisements , 1607 Affiliates definition for purposes of bond issues, 1297.1(d) consolidated financial statements, 1161.13 long-term CPs and bonds, App. 19 (Sec. 2) reports required of foreign, 1161.14 Agrarian Reform/Agricultural Credit alternative investment, 1341.5 beneficiaries defined, 1341.1 borrowers qualified, 1341.2 interest on, 1341.8 loans eligible for, 1341.3; 1353 rediscount of papers under the, 1273.3 reportorial requirement, 1341.9 required allocation for, 1341.3; 1389.3 securities for, 1341.7(a) syndication of, 1341.6 Agricultural Guarantee Funds transfer to Philippine Crop Insurance Corporation, 1345 Allied Undertakings definition for purpose of consolidated financial statements, 1161.13 (See also Investments ) Allowance incentive allowance under Masagana 99 to government technicians, 1352.3 Area Marketing Cooperative (AMC) definition for purpose of the Cooperative Finance System, 1355.1(c) Appraisal Surplus exclusion from capital, 1106.1; 1106.2(b) Armored cars operation of, 1604.5 Aromatic Tobacco Trading Loan Fund (ATTLF) qualified borrower, 1356.2(a) Articles of Incorporation applicability of Corporation Code, 1173 Assessment Fees on banks, 1608 Assets Acquired poster on sale of, 1394 Assigned Capital definition for purpose of rules on peso borrowings, 1346.4(e) Assignment, Certificate of standard form, App. 17 Audit financial Board action on audit report, 1165.5(b) frequency, 1165 inclusion of trust operations in, 1415.3 start of audit, 1165.5(a) submission of audit report, 1165.5(a) operations/management audit program, 1165 Board action on audit report, 1165.5(b) exemption from, 1165.4 frequency, 1165 inclusion of trust operations in, 1415.3 minimum contents of audit report, 1165.3 minimum coverage, 1165.2 submission of audit report, 1165.5(a) who may conduct, 1165.1 BOI Export Priorities Plan list of products, App. 13 rediscount of papers, 1273.1 Bad debts definition for purposes of cash dividend declaration, 1136.1 write-off, 1304.7 Bank Premises appreciation in book value, 1606.2 ceiling on investments in, 1606.3 definition for purpose of investment ceiling, 1606.3 expansion of, 1606.1 non-risk assets, 1116.4(h) pre-condition for EKB authority, App. 1 (I-D) Bank Protection CB inspection, 1167.7 certificate of compliance, App. 10 degree of security needed, 1167.5 objectives of regulations on, 1167.1 reports, 1167.6 security devices, 1167.5 security officer, 1167.3 security program, 1167.4 security survey, 1167.5 Banking Days and Hours changes in, 1156.2; 1156.5 definition for purpose of booking deposit transactions, 1263.2 for purpose of bank protection, 1167.2 emergencies, in cases of, 1156.3 minimum, beyond minimum, 1156; 1156.1 reports to CB, 1156.2; 1156.4 Banking Offices definition for purpose of bank protection, 1167.2(a) establishment/relocation of capital requirements, 1151.3 citizenship requirements, 1151.2 conditions precluding acceptance/processing, 1151.5; 1151.6 date of opening, 1151.8 investment-deposit ratio as pre-condition to, 1393.5 other requirements/factors to be considered, 1151.4 prior MB approval, 1151.1 priority in processing applications, 1151.7 interbranch transactions, 1161.7 relocation of, 1151.9 types of (see separate captions) extension offices money shops savings agencies Barangay Savings Movement solicitation of deposits under the, 1215.2 Barrio Savings Found contribution under the Masagana 99 Program, 1352.2(a)(3) Bill of Exchange as deposit substitute instrument, 1281.1 definition for purpose of the single borrower's loan limit, 1301.2(e) Bonds CBCI, 1601.1 DBP, 1601.2 denomination, 1297.4(a) features. 1297.4 National Housing Authority Bonds, 1601.5 notice to CB, 1297.3 Premyo Savings Bonds, 1601 registry for, 1297.4(e) reserve required against, 1297.5 SEC registration, App. 19; 1297.2 sinking fund for, 1297.4(d) Borrowings definition for purposes of quasi-banking functions, 1289.2(a) Business Group definition for purpose of limits on bank stockholdings, 1131.1 stockholdings of, 1131.1 Business Name of EKB, 1174 of VCC, 1384.3 By-Laws applicability of Corporation Code, 1173 CB Clearing Account (See "Due from CB" Account) CP Committed Credit Line availment, 1348.3 CB financing of, 1279 commitment aggregate, 1348.2 individual, 1348.3 loan limit, 1348.5 precondition to commercial paper issue, 1293.1(c) qualifications of grantor, 1348.1 SEC registration, App. 18 (Sec. 3) Call Loans as an interbank loan, 1343 slips/tickets for 24-hour loans, 1343.4 Capital definition, 1106.1; 1106.2(b) Capital Stock (See Stock/Stockholders) Capitalization for commercial banking authority merger or consolidation to meet minimum, 1111 minimum, 1106.2 for expanded commercial banking authority consolidation with subsidiary networth, 1106.3 merger/consolidation to meet minimum, 1111 minimum, 1106.1; App. 1(A) public offering and stock exchange listing, 1101.4(a); App. 1(A) for FCDU authority minimum, 1106.4 for quasi-banking authority minimum, 1289.4(a) Cash Dispensers , 1604.4 Cash Price definition for purpose of the Truth in Lending Act, 1305.2 Cash on Hand definition for purpose of networth-to-risk asset ratio, 1116.4.d Central Bank Certificates of Indebtedness ( CBCIs ), 1601.1 Certificate of Land Title , 1341.7 Checks drawn against out-of-town accounts, 1603.4 drawn in favor of the Commissioner of Customs, 1265 postdated, 1281.1; 1290.1 Chits under Masagana 99. 1352.4 Clean Loans ( See Unsecured Loans) Clean Note Policy , 1612; Apps. 35, 36 and 37 Clearing Cut-Off Time definition, 1263.2 poster on, 1263.7 reglementary cut-off time, 1263.1 report to CB on, 1263.8 Clearing Operations clearing advice, 1603.2(d)(5) clearing between centers, 1603.1(d)(1) clearing centers/areas, 1603.2(a); App. 31 clearing clerks, 1603.1(b) exclusion from clearing, 1603.1(d)(4) inter-regional clearing, 1603.2; App. 32 clearing items, 1603.1(c) out-of-town clearing, 1603.1(d)(1); 1603.4 regular clearing, 1603.1(d)(1) special/direct clearing, 1603.1(d)(2) clearing of treasury bills, 1603.1(c) clearing of treasury warrants, 1603.3 loss of items, 1603.1(e) returned items, 1603.1(d)(3) time of exchanges, 1603.1(a) Close-end Registration of long-term commercial paper, App. 19 (Sec. 4) Collateral (See also Secured Loans ) for agrarian reform/agricultural credit, 1341.7(c) for bond issues, 1297.4(d) for borrowings under quasi-banking functions, 1281.6 for CP-committed credit line, 1279.3(b) for domestic stand-by L/Cs, 1347 for money-market placements of rural banks, 1287.2(c) rediscount with CB regular repurchase with CB, 1389.3(c) reverse repurchase with CB, 1389.4(c) deposit/sale of foreign currency/notes/coins, 1273.11(b, e, and f) substitution under a deposit substitute borrowing, 1281.7(b) substitution under a trust indenture for bond issues, 1297.4(d) under the Aromatic Tobacco Trading Loan Fund, 1356.2(b) under the Cooperative Finance System, 1355.9(a) under the Grains Quedan Financing Program, 1354.4(c)(1) under the Masagana 99 and Masaganang Maisan, 1352.2(a)(4) under the Palay Marketing Program, 1353.2(c)(1) Go-maker in loans against personal security, 1319.4 Combined Capital Accounts definition, 1116.4(c); App. 1(I-A) Commercial Bank inclusion to term, 1101.2 scope of authority, 1101.2 Commercial Papers basic features, App. 18 (Sec. 13) definition for purpose of SEC rules on long-term CP, App. 19 for purpose of SEC rules on short-term CP, App. 18; 1293.1(b) for purpose of single borrower's loan limit, 1301.2.f exempt from registration, App. 19 (Sec. 6); App. 18 (Secs. 4 and 5) exhibition of certificate of registration, 1293.3 guarantees for issues, 1293.2 maturity value, App. 18 (Sec. 14); 1293.1(f) qualifications of issuer, 1293.1(c) registration of long-term CPs, App. 19; 1293.2(a) short-term CPs, App. 18 short-term issues, 1293.1 long-term issues 1293.2 Commingling allowed, 1293.1(f) prohibition on, 1424.1 Commissioner of Customs disposition of checks drawn in favor of, 1265 Commissions under fund management, 1426 under the Rehabilitation Program for Typhoon Victims of 1978, 1277(e) under trust operations, 1412 Common Stock (See Stock/Stockholders) Common Trust Fund definition, 1402.1(d) exposure limit, 1414.4 limitations to, 1414 management of, 1414.2 security deposit for, 1404 the plan, 1414.1 trustee as participant in, 1414.3 Compensating Deposit prohibition against, 1302.1; 1348.3 Comptroller CB-designated, 1335 Consolidated Financial Statements , 1161.13 Consolidated Special Agricultural Rehabilitation Fund (SARF) , 1273.13 Consolidation of Banks CB approval, 1111.2 effect on trust authority of banks, 1406 suspension of networth-to-risk asset ratio, 1116.3 types encouraged, 1111.1 valuation of assets offered, 1111.3 Cooperative definition for purpose of Cooperative Finance System, 1355.1(a) Cooperative Finance System (CFS) qualified borrowers, 1355.5 Copper Stabilization Fund Program qualified borrowers, 1359.3 Cost Method definition for consolidation of financial statements, 1161.13(a)(7) Cottage Industry Guarantee and Loan Fund (CIGLF) qualified borrowers, 1357.1(a); 1357.3(a) Cotton Supervised Credit Financing Program (1982-83) , 1358; App. 20 Credit Card , 1328.1 Credit Information Exchange System , 1611 Credit Priority , App. 30 Creditor definition for purpose of the Truth in Lending Act, 1305.2 (a) Crop Insurance insurance for palay production, 1345.1 Crop Loans to sugarcane planters, 1396 Currency and Coins clean note policy, 1612, Apps. 35, 36 and 37 fit, App. 36 unfit notes, App. 37 Current Loans definition for purpose of interest accrual, 1303.5(a) DBP Bonds , 1601.2 DOSRI Loans application of rules to foreign banks, 1331.1 CB comptroller designated, 1335 ceilings on aggregate loans, 1331; 1332 individual loans, 1330 unsecured loans, 1330; 1331 credit card accommodations, 1328.1 exclusions from aggregate ceilings, 1332 general guidelines on, 1326 indirect borrowings, 1329(b) pre-requisite to trust authority, 1403(c)(3) procedural requirements, 1333 reportorial requirements, 1334 sanctions for non-compliance, 1336 transactions covered, 1327 transactions not covered, 1328 transactions under fund management included, 1424 transactions under trust agreement included, 1408; 1409(b) Data Bank on Financial Intermediaries information survey, App. 8 organizational chart, App. 9 Debts definition for purpose of peso borrowings of foreign firms, 1346.4(b) in process of collection, defined, 1136.1.a well-secured, defined, 1136.1.a Debt-to-Equity Ratio for purpose of IGLF Program, 1351.2(e); 1351.3(e) for purpose of peso borrowings of foreign firms, 1346.2; Apps. 25 and 26 Definitions affiliate, 1161.13.a(6); 1297.1(d); App. 19 (Sec. 2) agrarian reform beneficiaries, 1341.1(d) agricultural credit, 1341.1(c) amounts to be financed, 1305.2(g) allied undertaking, 1161.13 area marketing cooperative, 1355.1(c) assigned capital, 1346.4(e) bad debts, 1136.1 bank premises, 1606.3; 1116.4(h) banking days and hours, 1167.2(b); 1263.2 banking offices, 1167.2(a) bills of exchange, 1301.2(e) borrowings, 1289.2(a) business group,1131.1 capital, 1106.2(b); 1106.1 cash on hand, 1116.4.d cash price, 1305.2 combined capital accounts, 1116.4(c) commercial paper, App. 19; App. 18; 1293.1(b); 1302.2(f) common trust fund, 1402.1(d) compensating/derivative deposits, 1302.1 consolidated financial statements, 1161.13a(1) cooperative, 1355.1(a) cooperative finance group, 1355.1(h) cooperative rural bank (CRB), 1355.1(d) cost method, 1161.13.a(7) cottage industry, 1357.1(b) creditor, 1305.2(a) current loans, 1303.5(a) current market value, 1297.1(c) debt, 1346.4(b) debts in process of collection, 1136.1(a) debt-equity ratio, 1355.1(i) delivered price, 1305.2(c) depositary funds, 1239.2(b) deposits, 1326.1(d); 1393.4 direct borrowing, 1329(a) directors, 1326.1(a); 1141.1; 1146.6(a) disposable earnings, 1355.1(k) dormant/inactive accounts, 1166.12(a) down payment, 1305.2(d) due from CB, 1116.4(e) equity, 1346.4(d); 1346.2 equity investments, 1161.13.a(4) equity method, 1161.13.a(8) export-oriented firms, 1346.4(f) family group, 1131.2 finance charge, 1305.2(h) financial/non-financial allied undertaking, 1161.13.a(2); 1161.13.a(3) financial manager, 1421.1 food quedans, 1271.1 for the borrower's own account, 1289.2(b) foreign firms, 1346.4(a); 1346.1(e) fund or money from the Government and government entities, 1239.2(b) furniture, fixtures, equipment, 1116.4(i) government deposits, 1239.2 government-owned or controlled corporations, 1239.2(a) liabilities, 1301.2 (a) loan fund, 1355.1 (e) loanable funds, 1341.1(a) market value, 1297.1 money borrowed, 1301.2(b) money market placements of rural banks, 1287.1(a) net book value, 1297.1(b) net worth, 1116.4(c); App. 1(A) non-finance charges, 1305.2(f) non-risk assets, 1116.4(a); 1301 non-traditional products, 1346.4(g) officers, 1326.1(b) outstanding deposit, 1326.1(d) paid-in capital, 1384.1(c); 1326.1(e) past due accounts, 1304 persistent violation 1287.1(c) person, 1305.2(b) peso borrowings, 1346.4(c) purchase of receivables, 1289.2(c) readily marketable non-perishable staples, 1301.2(d) relending, 1289.2(d) revenue funds, 1239.2(b) risk assets, 1116.4(a) Samahang Nayon, 1355.1(b) secured loans, 1326.1(h) simple annual rate, 1305.2(i) small producer, 1355.1(c) staples, 1301.2.d stockholders, 1326.1(c) subsidiary, 1227.1(e); 1161.13.a(5) supervised credit, 1345.a teller's window, 1167.2(c) total assets, 1116.4(b) total capital accounts of a Philippine branch of a foreign bank, 1326.1(f) total loan portfolio, 1326.1(g) trade-in, 1305.2(e) trust account, 1402.1(b) trust funds, 1239.2(b) trust fund for AMCs, 1355.1(f) trust operations/business, 1402.1(a) unimpaired capital and surplus, 1301.2(c) unsecured loan, 1326.1(i) venture capital corporations, 1348.1.f well-secured debts, 1136.1.a Delivered Price definition for purpose of Truth in Lending Act, 1305.2(c) Demand Loans when past due, 1304.1 written demand for non-payment, 1304.2 Demand Deposits authority to accept or create, 1201 checks without sufficient funds, 1205 interest on, 1202; 1242 prohibition against temporary overdrawings (TOD), 1204.1 prohibition on drawings against uncollected deposits (DAUD), 1204.2 prohibition on officers/employees, 1206 reserves against, 1203 pick-up services, 1266 Deposit Liabilities Barangay Savings Movement, 1215.2 barrio savings fund, 1352.2.a(3) booking of transactions abstract of contingent accounts, 1263.6 after clearing cut-off time, up to close or regular hours, 1263.3; 1263.4 after close of regular hours, 1263.5 up to clearing cut-off time, 1263.1 certification for incorporation purposes, 1262.2; App. 12 compensating/derivative, 1302.1 definition for purpose of DOSRI rules, 1326.1.d for purpose of the investment-deposit ratio, 1393.4 demand (see separate caption) dormant/inactive accounts (see separate caption) government (see separate caption) hold-out on, 1116.4.f insurance on, 1262.3 interbank, 1301 NOW accounts (see separate caption) savings (see separate caption) specimen signature requirement, 1262.1 solicitation of (see Solicitation of Deposits ) time deposits (see separate caption) Deposit Substitutes features of instruments, 1281.3 hold-out on, 1161.4.f instruments, 1281; 1281.1 interest/yield rate, 1285 matured and unclaimed, 1282 minimum trading lot, 1284 physical delivery of instruments, 1281.6 placements by rural banks, 1287 renewals, 1281.7(c) reserves, 1283 standardized instruments, 1281.4; App. 17 term of, 1282 Derivative Deposits prohibition against, 1301.2; 1348.3 Direct Seeding Scheme , 1332.6 Directors annual list of, 1144 bio-data of, 1144 citizenship for purpose of quasi-banking authority, 1289.4(c) definition for purpose of DOSRI rules, 1326.1 for purpose of qualification requirements, 1141.1 for purpose of interlock, 1146.6 (a) disqualifications of, 1143.1; 1336(b) effects, 1143.4 procedures, 1143.3 government representatives, 1146.4 interlocking directorships, 1146.1 interlocking directorships and officerships, 1146.2; 1384.5 loans to (See DOSRI Loans ) place of meetings, 1171 pre-qualification for EKB authority, App. 1(C) profit-sharing programs for, 1147 qualifications of, 1141.2 real estate transaction between bank and DOSRI, 1161.5 responsibilities under fund management operations 1422 responsibilities under trust authority, 1407.1 Disclosure Statements of effective rates of interest, 1248 under the Truth in Lending Act, 1305; App. 21 Dividends accrued interest for purpose of declaration of, 1136.1.b amount available as, 1136.1.c declaration of cash dividends, 1106.1; 1136.2; 1336 general guidelines on declaration, 1136.1 recording of, 1136.1.e Domestic Standby L/Cs, 1347 Dormant/Inactive Accounts definition, 1166.12(a) internal control measures for, 1166.12(c) maintenance fees chargeable on, 1217 Drawings Against Uncollected Deposits (DAUD) application to savings accounts, 1216 prohibition on, 1204.2 "Due from CB" Account allowable check withdrawals from, 1254.1 balance per CB books against balance per bank books, 1161.6 collection of unpaid fines thru, 1610(b); App. 34 collection of cost of checks and documentary stamps, 1610.2 debit for clearing checks, 1254.2 definition for purpose of the net worth-to-risk asset ratio, 1116.4(e) overdrawings interests/penalty for, 1274.5(a) sanctions, 1256.2 treatment for reserve purposes, 1256.2 remittance of RB rediscounting proceeds thru, 1604.3 Employees financing assistance to officers and, 1337 profit sharing program for, 1147 prohibited demand deposits for officers/employees, 1206 Equity definition for purpose of rules on peso borrowings, 1346.2 Equity Investments definition for purpose of consolidated financial statements, 1161.13 investments abroad. 1381.3 Equity Method definition for purpose of consolidated financial statements, 1161.13 Escalation Clause , 1303.2 Expanded Commercial Bank (EKB) exercise of investment house function by, 1101.1 qualifications, 1101.3 requirements for EKB authority, App. 1 scope of authority, 1101.1 Export-Oriented Firms definition for purpose of rules on peso borrowings, 1346.4(f) Export Packing Credit , 1273.1.d Export of Manpower , 1273.14 Extension Offices reports of, 1161.17 Facsimiles , 1609; App. 33 Family Group ceiling on bank stockholdings of, 1131.2 definition for purpose of limits on bank stockholdings, 1131.2 transfer of shares within, 1126.1(a) Fees assessment on banks, 1608 fund management, 1426 inquiry from the credit information exchange system, 1611.5 SEC registration, App. 18 (Sec. 15); App. 19 (Sec. 9) service/maintenance of dormant/inactive savings accounts, 1217 trust administration. 1412 Finance Charges definition for purpose of the Truth in Lending Act, 1305.2(h) Financial Manager definition for purpose of fund management. 1421.1 Financing Plans for officers and employees, 1337 Fines collection of, 1601.1; App. 34 for refusal to permit examination, 1161.2.c for reserve deficiencies, 1256 for willful delay in the submission of reports, 1161.2.b Floating Interest Rate , 1303.4 Food Quedans rediscount with CB, 1271.1; 1271.2 definition, 1271.1 Foreign Equity in Domestic Banks limit on total holdings, 1126.2 Foreign Firms definition for purpose of peso borrowings, 1346.1(e); 1346.4(a) Fringe Benefit Program for officers and employees, 1337 Fund Management administration, 1422 distinguishing features, 1423 fees/commissions, 1426 financial manager, 1421.1 inclusion as DOSRI, 1424 investments, 1424 prohibited commingling, 1424.1 security for faithful performance of duties, 1427 separation of accounts; reports, 1425 Furniture, Fixtures, Equipment definition/valuation for purpose of computation of net worth-to-risk assets ratio, 1116.4(i) Gift/Giveaways distribution rules, 1261.2 lotteries, 1261.1 under the TIPID Movement, App. II (V) "Go-Around Method" interest rate computation thru, 1389.3(a); 1389.4(a) Government deposits authority to service, 1239; 1239.5 banks authorized to accept, 1239.1 definitions, 1239.2 eligible investment, 1239.1 exempt transactions, 1239.4 investments for placements with trust department, 1410 liquidity floor, 1239.3 prohibition against borrowing from, 1291 Government Securities dealership accreditation, 1389 (c) exclusive transactions thru, 1389.1 market-making activities of, 1389.2 open market transactions thru, 1389 (b) special R/P window, 1276.1 definition for purposes of money market placements of rural banks, 1287.1(b) for purposes of rules on bond issues, 1297.1(a) deposit for fund management, 1427 deposit for trust function, 1410 investment for regional retention scheme, 1393.3 open-market transactions, 1389 purchase and sale, 1389 (i); 1601 reproduction of facsimiles, App. 33 reserves against deposit substitutes, 1283.1 sale of, 1601 withholding tax on, 1604.3 Grace Period , 1393.8 Food Quedan Financing Program guidelines on, 1354 loans considered as agrarian reform credits, 1341.3 Quedan Guarantee Fund Board Rules, App. 28 qualified borrowers, 1354.4(b) term of loan, 1357.3(e) Food commodities in storage, 1354.6 Guidelines on use of food trust receipts, 1354.7 Guarantee by the Philippine Export and Foreign Loan Guarantee Corporation, 1116.4a(14) for construction contracts, 1301.3.a issued for without recourse transactions, 1290.1 straight guarantee scheme, IGLF, 1351.1(d); 1351.3(h) standby L/Cs, 1347.7 under Cooperative Finance System, 1355.2(f) under Cottage Industry Guarantee and Loan Fund, 1357.1(e); 1357.4 under Cotton Financing Program, App. 20 under Grains Quedan Financing Program, 1354.4(c)(7); App. 28 under KKK Program, 1280.6 under Masagana 99 and Masaganang Maisan, 1273.3(d); 1352.2(a)(7); 1352.7(b) IAC Certification procedures, 1346.5 requirement for, 1346.1(a) Industrial Guarantee Loan Fund (IGLF) Program accreditation system, 1351.1 industrial dispersal, 1351.1(f); 1351.3(d)(3) loans to small industries, 1351.2; App. 27 loans to medium-scale industries; 1351.3 loans covered by IGLF guarantee not special time deposit scheme, 1351.1(d) straight guarantee scheme, 1351.1(d) Installment loans when past due, 1304.1 rediscount with CB, 1271.1(d); 1271.2(b) Insurance on crops, 1345.1 deposits, 1262.3 deposit substitutes, 1281.3(f) real estate improvements, 1311.1 Interbank deposits subject to single borrower's loan limit, 1301 Interbank loans accounting procedures, 1343.2 bank borrowings from trust funds, 1292 call slips/tickets for 24-hour loans, 1343.4 definition for purpose of CB clearing, 1343 for purpose of SEC rules on short-term loans, App. 18 exemption for prescribed minimum features for deposit substitutes, 1281.3 interest rate ceiling on, 1303; 1343.3 required reserves, 1283 single borrower's loan limit, 1301 transfer tickets for, 1343.1 Interest on borrowings bonds issued by EKBs, 1297.4(c) overdrawings and emergency advances with CB, 1274.5(b) repurchase agreements with CB, 1389.3(a); 1389.4(a) on deposits with CB, 1254.3 on deposit liabilities advance payment, 1244.1 on demand deposits, 1201; 1242 disclosure on computation of, 1248 in kind, 1245 on NOW accounts, 1224; 1243 on provident fund contributions of bank employees, 1247 on savings deposits, 1213; 1243 on time deposits, 1244; 1231 when payable, 1244.1 on deposit substitutes advance payment, 1285.2 ceiling, 1285 in kind, 1285.1 on preterminated deposit substitutes, 1285.3 when payable, 1285.2 on loans in absence of stipulation, 1303.1 accrual of, 1303.5; 1304.3 on agrarian reform/agricultural credit, 1341.8 escalation of, 1303.2 floating interest rate, 1303.4 funded by CB rediscounting proceeds, 1271.2 inclusions and exclusions from rate ceilings, 1303 interbank, 1303; 1343.3 long-term, 1303 maximum/effective rates, 1303 modes of expressing fixed rate, 1303 poster of minimum lending rates, 1303.6 reference rate, 1303.4 secured by government securities, 1303.3 on short-term loans, 1303 under the Aromatic Tobacco Trading Loan Fund, 1356.5(c) under the Cooperative Finance System, 1355.10 under the Cotton Financing Program, App. 20 under the KKK Program, 1280.4 under the Masagana 99 and Masaganang Maisan, 1352.2(a)(5) under the Palay Marketing Credit Program, 1353.2(c)(4) under the Rehabilitation Program for Typhoon Victims of 1978, 1277(d) on revenue collections, 1602.11 Interest period under floating interest rate, 1303.4 Interlocks between a bank and a VCC, 1384.5 within financial system, 1146 Internal Control minimum standards prescribed, 1166 procedures for dormant accounts. 1166.12 Investment investment house function how performed by EKB, 1101.1 investments in equities of allied undertakings authority of EKBs and KBs, 1376 limits based on net worth of financial allied undertakings, 1378 limits based on net worth of other quasi-banks, 1378.1 EKB group investors in quasi-banks, 1378.1 (c) limits on non-financial allied undertakings, 1379.1 qualified activities/enterprises, 1377; 1379 (a) investments in equities of non-allied undertakings authority of EKBs and KBs, 1376; 1380 limits based on net worth of investee, EKB group investor, 1380.2 qualified enterprises, 1380.1 investments in equities of venture capital corporation (See Venture Capital Corporation ) investments under trust functions (See Trust Operations ) deducted from net worth of bank, 1116.4(c) disqualifications, 1383 limits based on net worth of investor-bank, 1381 methods of accounting, 1161.13(a)(7) and (8) underwriting exposure excluded from limits, 1382 Investment-deposit ratio alternative investments, 1393.3 compliance with, 1393.2 exclusions from eligible investments, 1393.4 grace period, 1393.8 inclusions to total deposits, 1393.4 regional grouping, 1393.6; App. 29 regional retention rate, 1393.1 Inward Bills for Collection , 1603.4 Items in Litigation , 1304.1(g) Joint or Split Financing under the Cooperative Finance System, 1355.3(b) Kilusang Bayan Guarantee Fund (KBGF) allocation to the Fund under the Cooperative Finance System, 1355.1(k) Kilusang Kabuhayan at Kaunlaran (KKK) Trust Fund loan releases under the, 1360 CB funding from, 1280 Lender of Last Resort Facility availment quota, 1274.4 conditions to access, 1274.2 nature of facility, 1274.1 terms of credit collateral, 1274.3(b) interest rate, 1274.5(c and d); 1274.3(a) loan value, 1274.3(c) penalty rate, 1274.5(e) repayment period, 1274.3(d) Letters of Credit (L/Cs) domestic stand-by, 1347 excluded from single borrower's loan limit, 1301.3 Liabilities definition for purpose of single borrower's loan limit, 1301.2(a) License expanded commercial banking authority 1101.4 who may be granted authority, 1101.3 servicing of government deposits, 1239 Liquidated Damages under the Aromatic Tobacco Trading Loan Fund, 1356.7 for non-payment of CB emergency loans, 1274.5(e) Liquidity Floor required for government deposits, 1239.3 required for sales of treasury bills, 1601.3(b)(2) Loans borrowers DOSRI (See separate caption) rural banks, 1350 sugarcane planters, 1396 government, 1332(c) under the Grains Quedan Financing Program, 1341.3 collaterals (see also separate caption) assets acquired in settlement of, 1394 redemption of foreclosed real estate security, 1311 loan value of collaterals under the Agricultural Reform Credit and Agricultural Credit, 1341.7(c) under the Aromatic Tobacco Trading Loan Fund, 1356.6(b); 1356.3(b) under the Cooperative Financing Program, 1355.9(b) under the Grains Quedan Financing Program, 1354.4 (c)(3) real estate mortgage, in general, 1311 for low-cost housing loans, 1313 for chattel mortgage in machineries, 1313 for bond issues, 1297.4(d) for CB rediscount of CP-related papers, 1279.3(c) for CB rediscount of M-99 and Masaganang Maisan papers, 1273.6(a) matured loans bad debts (See separate caption) installment loan, when past due, 1304.1 refinancing, 1304.6 renewals, 1304.4 restructured loans, 1352.7(f) maturities/term on demand (See Demand Loans ) under the Aromatic Tobacco Trading Loan Fund 1356 (a) under the Cooperative Finance System, 1355.8 under the Copper Stabilization Fund Program, 1359.5(b) under the Cottage Industry Guarantee and Loan Fund, 1357.3(e) under the Cotton Financing Program, App. 20 under the Grains Quedan Financing Program, 1354.4(c)(4) under the Rehabilitation Program for Typhoon Victims of 1978, 1277(d) under CB rediscount of CP-committed credit line, 1279.3 (d) under CB loans to institutional borrowers under P.D. 717, App. 15 under CB rediscount of M-99 and Masaganang Maisan Program, 1273.3(b); 1273.6(d) portfolio definition of DOSRI rules, 1326.1 (g) of government financial institutions, 1395 proceeds to acquire preferred shares of lender bank, 1302.2 utilization according to purpose, 1302 regionalization under the IGLF Program, 1351.1(f) types of loans call, 1343 clean (See Unsecured Loans ) CP-committed credit line, 1348 crop, 1396 Loanable finds computation of, 1341.4 definition for purpose of agricultural credit, 1341.1(a) Lotteries to attract deposits, 1261.1 (See also Gifts/Giveaways ) Majority Rule for DOSRI rules, 1333(c) voting concurrence below/greater than, 1172 Management Contracts , 1175 Market Value definition for purpose of bond issues, 1297.1(c) Maisagana Program qualifications of applicant banks, 1293.12 Masagana 99 allowance to government technicians, 1352.3 coordinating agencies, 1352.1 "direct-seeding" scheme, 1352.6 guarantee payments on arrearages, 1352.7 interest rebates, 1273.6(a) lending, policies and procedures, 1352.2 qualified borrowers, 1352.2(a)(1) rediscounting of papers, 1273.6 Masaganang Maisan rediscounting of papers, 1273.6 Maturities of Borrowings bond issues, 1297.4(b) borrowings thru the CB-RP window, 1389.4(b); 1389.3(b) borrowings from trust departments, 1292 deposits substitutes, 1282 money market placements or rural banks, 1287.2(b) STDs under the IGLF Program, 1351.2(f); 1351.3(f) Medium-Scale Industry under the IGLF Program, 1351.3 under the VCC scheme. 1384.2 Merger (See Consolidation of Banks ) Minimum Trading Lot bond issues, 1297.4(a) borrowings from trust department, 1292 deposit substitutes, 1284 Minors as depositors, App. 11(VI) Money Borrowed definition for purpose of single borrower's loan limit, 1301.2(b) Money Market Placement of Rural Banks definition, 1287.1(a) limits, 1287.2(a) Money Shops banking hours of, 1156 establishment of, 1152.1; 1152.2 lending operations of, 1349 records/reports, 1161 scope of operations, 1152.3 Negotiable certificates of Time Deposits, 1235 foreign branches, 1235.4 insurance coverage, 1235.2 minimum features, 1235.1 other requirements, 1235.3 reserve requirements, 1235.6 Net Book Value definition for purpose of bond issues, 1297.1(b) Net Worth appreciation surplus excluded from, 1106.2 average net worth, 1116.2 definition 1116.4(c); App. 1 (I-A) of Philippine branch of a foreign bank, 1326.1(f) Net Worth-to-Risk Asset Ratio M-99 arrearages restructured, excluded, 1352.7(h) prerequisite to EKB authority, App. 1(I-B) prerequisite to trust authority, 1403(c)(4) and (5) Non-finance Charges definition for Truth in Lending Act, 1305.2(f) Non-Allied Enterprises (See Investment ) Non Financial Allied Undertakings (See Investment ) Non-risk Assets , 1116.4(a); 1301 Non-traditional Products definition for purpose of peso borrowings, 1346.4(g) Non-trust Accounts accounts with time deposit privileges, 1415.6 agreements not constituting trust accounts, 1405 NOW Accounts authority to accept, 1223 in CB clearing, 1603.1(d) interest on, 1224; 1243 reserves, 1225 Officers annual list of, 1144 bio-data of, 1144 definition for purpose of DOSRI rules, 1326.1(b) for purpose of interlock, 1146.6(b) for purpose of qualification, 1142.1 demand deposits not allowed, 1206 disqualification, 1143.2; 1143.3; 1143.4 financial assistance under fringe benefit program, 1337 interlocking directorships and officerships, 1146.2; 1384.5 loans to (see DOSRI Loans ) profit sharing programs for, 1147 qualifications in general, 1142.2 for EKB authority, App. 1 (I-C) for trust operations, 1407.2 real estate transactions with bank. 1161.5 Open-Market Operations , 1389 Organizational Chart , App. 9 Out-of-Town Checks , 1603.4 Outright Purchase and Sale , 1389(d) Outstanding Deposit definition for purpose of DOSRI rules, 1326.1(d) Packing Credit , 1273.1d; App. 14 Paid-in Capital definition for purpose of DOSRI rules, 1326.1.e venture capital corporation, 1384.1(c) Parcellary Plans for Sugarcane Planters , 1396 Participation, Certificate of standard form, App. 17 Past-Due Accounts accounts considered past due, 1304.1 accrual of interest income on, 1304.3 definition, 1304 Maisagana loans, 1273.12 M-99 arrearages restructured, 1352.7(h); App. 20 report on, 1304.5 write-off (See Bad Debts ) Penalty Rate Aromatic Tobacco Trading Loan Fund loans, 1356.7 Cottage Industry Guarantee and Loan Fund loans, 1357.3(g) failure to negotiate L/C securing PN rediscounted with CB, 1273.2(e)(2) wilful delay in reporting/remittance of tax collections, 1602.10 Performance Security for fund management, 1427 for trust operations, 1403(b) Person definition for the purpose of the Truth in Lending Act, 1305.2(b) Personal Security( See Unsecured Loans) Peso Borrowings by Foreign Firms build-up for required debt-to-equity ratio, App. 26 conditions for availment, 1346.2 debt-to-equity ratio, App. 25 foreign firms exempted, 1346.3 guiding principles, 1346.1 procedural requirements, 1346.5 trust department loans included, 1415.5 Postdated Check , 1290.1 (a) (1) Post-Harvest facilities , 1363 Posters/Posting assets acquired for sale, 1394 banking days and hours, 1156.6 clearing cut-off time, 1263.7 interest on deposit, computation, 1248(f) permit to issue commercial papers, 1293.3(a)(2) Truth in Lending Act abstract, 1305.6 Preferred Stock (See Stock/Stockholders ) Premyo Savings Bonds , 1601.4; 1254(b)(2); 1283.1(b) Pretermination deposit substitute, 1285.3 stipulation in commercial papers, 1293.1 (g) time deposits, 1244.3 Pro-forma Statements/Certification Board resolution for authorized signatories in reports, Apps. 5, 6 and 7 disclosure statement under Truth in Lending Act, 1305.1; App. 21 deposit-in-trust for incorporation purposes, 1262.2; App. 12 standardized instruments evidencing deposit substitute, 1281.4; App. 17 Promissory Notes deposit substitute instrument, 1281; 1281.2 Promotional Campaigns (See also Gifts/Giveaways ) cash dispenser operations, 1604.4 Provident Fund of Bank Employees , 1247 Public Offering EKB capital, 1101.4(a); App. 1 (I-A) Purchase of Receivables definition for purpose of quasi-banking functions, 1289.2(c) subsidiaries as seller, 1288 yield ceilings, 1388.1 Quasi-banking custodianship of securities, 1281.5 documents accompanying application for, 1289.5 essential elements of, 1289.1 pre-qualification, 1289.4 transactions not considered quasi-banking functions, 1289.3 Raffles (See Gifts/Giveaways ) Rebate on interests Masagana 99 and Masaganang Maisan, 1273.6(c) preterminated deposit substitutes, 1285.3 Records daily transactions, 1161 dividend declaration, 1136.1(e) managed funds, 1425 transactions under the Rehabilitation Program for Typhoon Victims of 1978, 1277.1 Uniform System of Accounts, 1161 "with recourse" papers rediscounted with CB, 1278 Redemption Period loan secured by real estate mortgage, 1311 Rediscount/Rediscounting availment quota export papers, 1273.1.e in general, 1269.1 non-traditional export papers, 1273.2 eligibility of papers, 1269.2 loan values, 1271.1 maturities, 1269.3 maximum lending rates on rediscount proceeds, 1271.2 papers covering agrarian reform credit, 1273.3 Aromatic Trading Loan Fund Program, 1356.6 corporate manpower exporters, 1273.14 Cottage Industry Guarantee and Loan Fund, 1357.6 deposit/sale of foreign currency notes/coins, 1273.11 domestic sales of raw/frozen tuna, 1273.15 FKBs with banking units in areas inadequately served by rural bank, 1273.16 export of services and construction contracts, 1273.5 export products under the Export Priorities Plan, 1273.1 Grains Quedan Financing Program, 1354.4.b(6) loans to rural banks, 1350 (d) to (g) Masagana 99/Masaganang Maisan, 1273.6; 1273.3(d) Maisagana Program, 1273.12 non-traditional export products of small-scale/cottage industries, 1273.2 pledges of bank's shareholdings, 1273.10 pledges of blue chip/high grade shares of stock, 1273.7 qualified local congress organizers and professional associations, 1273.17 Rehabilitation Program for Typhoon Victims of 1978, 1277 tax credit certificates of exporters, 1273.8 ten-year high priority projects, 1273.9 sales to CB of eligible/acceptable foreign currency notes/coins, 1273.18 sales of coconut oil to the PNOC by coconut oil mills/millers/dessicators, 1273.19 small corn farmers, corn plantations, corn traders and exporters, 1273.20 preferential rediscounting, 1271 scope/definition, 1271.2 qualifications for availments, 1270.1; 1270.2 recording of "with recourse" papers rediscounted with CB, 1273 rediscount rates, 1271.2; 1273.11(c); App. 20 CP-committed credit lines, 1297.3 remittance of collection on rediscounted papers, 1272 remittance of proceeds due rural banks, 1604.3 Reference Rate determination of, 1303.4 Refinancing/Restructuring of Loans , 1304.6 Regional Groupings for purposes of investment-deposit ratio, 1393.6; App. 29 Regional Retention Rate (See Investment Deposit Ratio) Registration, Certificate of CP issues, 1293.3 Rehabilitation Program for Typhoon Victims of 1978 rediscount with CB, 1277 Relending definition for quasi-banking functions, 1289.2(d) Renewa l deposit substitute, 1281.6.c. loans, in general, 1304.4 loans against personal security, 1319.3 Reports authorized signatories to, 1161.1.b; Apps. 5.6 and 7 categories of, 1161.1.a complete list, App. 4 deadlines, App. 4 frequency, App. 4 manner of submission and deadline for, 1161.11; 1161.12 on agrarian reform/agricultural credit, 1341.9 on banking hours, 1156.2; 1156.4 on compliance with net worth to risk assets ratios 1116.5 on data bank on financial intermediaries, 1161.3 on clearing cut-off time, 1263.8 on commitments to grant line to CP issuer, 1348.4 on compliance with regulations on bank protection, 1167.6; App. 10 on consolidated financial statements of investor-financial institution and its subsidiaries/affiliates, 1161.13 on investment-deposit ratio, 1393.7 on crimes/losses, 1161.4 on departmental profit and loss, 1161.8 on directors and officers, 1144 on dividends declared, 1136.1.d on DOSRI loans, 1334 on financing plans for officers and employees, 1337.4 on fund managed, 1425 on investments in non-allied enterprises by EKBs, 1380.3 on loans and other credit accommodations aggregating P1M and above, 1161.10 on loans of more than 365 days, 1388.1 on minimum lending rates, 1303.6 on money market placements of rural banks, 1287.5 on outstanding equity investments in, and outstanding loans to, non-allied enterprises, 1161.15 on past due accounts, 1304.5 on real estate transaction between a bank and DOSRI, 1161.5 short-term prime rates, 1161 on stockholders and their stockholdings, 1161.9; 1126.1(c) on volume of, and weighted average interest rates on deposits and loans, 1161.16 on trust accounts, 1415.1; 1415.2 on TIPID Movement accounts, App. 11(V) organizational chart, App. 9 required of creditors under Truth in Lending Act, 1305.5 extension offices, 1161.17 foreign subsidiaries/affiliates of domestic banks, 1161.14 money shops, 1161 venture capital corporations, 1384.4 submitted to SEC by CP issuers, App. 18 (Sec. 17); App. 19 (Sec. 8) Repurchase Agreements regular repurchase agreement with CB, 1389.3 reverse repurchase agreement with CB, 1389.4 by financial intermediaries with CB, 1276 R/P window for inventory financing, 1276.1 overnight repurchase facility, 1389.5 standard form, App. 17 type of deposit substitute instruments, 1281 Reserves against bond issues, 1297.5 against deposit liabilities accounts/deposits subject to, 1255; 1601.2; 1604.1; 1601.3(b) (1); 1292 amount required as, 1253 composition/form of, 1254 computation of position, 1255 demand deposits, 1203 exemptions from, 1255; 1356.8; 1601.1 NOW accounts, 1225 penalties for chronic deficiency, 1256.1; 1256 prerequisite to EKB authority, App. 1(B) prerequisite to trust authority, 1403.c(6) report on compliance with, 1257 savings deposits, 1214 time deposits, 1232 against deposit substitute liabilities composition/form of, 1283.1 computation, 1283.2 deficiencies, 1283.3; 1283.4 prerequisites to EKB authority, App. 1(B) prerequisites to trust authority, 1403.c(6) required reserves, 1283 report of compliance, 1283.5 against marginal deposits unmatured export bills as reserve, 1393.5 borrowings from trust department subject to, 1292 Revaluation of Assets account credited for appreciation in bank premises, 1606.2 Revenue Funds definition for purpose of government deposits, 1239.2(b) Risk Assets definition for purpose of net worth-to-risk-asset ratio, 1164.a Rural Banks borrowers from specialized government banks 1350 cooperative rural banks (CRB), defined, 1355.1(d) deposit with other banks, 1301 money market placements of, 1287 Sabog-Tanim, Scheme , 1352.6 Samahang Nayon definition for purpose of Cooperative Finance System, 1355.1.b Sanctions for Deficiencies/Failures/Violations deficiencies chronic reserve deficiency, 1256.1 in reserve requirements, 1256 delayed reports/remittances of collections, 1602.10 failures to adopt the Uniform System of Accounts, 1161. cover overdrawings with CB, 1256.2 general provision on sanctions, 1199; 1299; 1399; 1499; 1699 non-compliance with minimum capital requirement, 1106.5 rules on promotional campaigns, 1261.4 the Truth in lending Act or any of its implementing regulations, 1305.8 non-submission/inaccurate reports on capital accounts, 1116.6 on overdrawings and emergency advances with CB 1274.5 submitting reports with unauthorized signatures, 1161.1.c violations of DOSRI regulations, 1336 guidelines on the Rehabilitation Program for Typhoon Victims of 1978, 1277 (j and K) interest on loans, 1285.4 investment-deposit ratio, 1393.5 prohibition against certain without-recourse transactions, 1290.1.b regulations covering long-term CPs, 1293.2.b regulations covering money market placements of rural banks, 1287.3 regulations on exhibition of certification of registration of CP issues, 1293.3 rules on financing plans for officers and employees, 1337.5 rules on peso borrowing of foreign firms, 1346.1 (f) rules and regulations on Cottage Industry Guarantee and Loan Fund, 1357.7 rules on unsecured loans, 1319.6 SEC registration rules and regulations, App. 19 (Sec. 11) SEC rules on registration of short-term CPs, App. 18 (Sec. 18) yield/interest rates on deposit substitutes, 1285.4 wilful delay on the reporting of collections/remittances. 1602.8 submission of reports, 1161.2 Savings Agencies , 1152.1(e) Savings Club (See TIPID Movement ) Savings Deposits DAUD prohibition on, 1216 dormant accounts, 1217 interest on, 1213; 1245 rental deposits of lessees under Rental Control Law, 1219 reserves against, 1214 special accounts of farmer-borrowers, 1218 withdrawals, 1216. Scope of Authority commercial banking, 1101.2 expanded commercial banking, 1101.1 Secured Loans by hold-out on deposits, 1116.4(f) by insured improvements on real estate, 1311.1 by Land Transfer Certificates, 1341.7 by machinery and equipment, 1313(b) by real estate mortgage, 1311; 1313 definition for purpose of DOSRI rules, 1326(h) by time deposits, 1314 Security Custodianship Receipt , 1281.5 Security Delivery Receipt (SDR) in connection with quasi-banking functions, 1281.5 Security Deposit (See Performance Security ) Security Officer , 1167.3 Security Program, 1167.4 Service Fees/Charges IGLF Program, 1351.2(k); 1351.3 Rehabilitation Program for Typhoon Victims of 1978, 1277.d Short term Prime Rates, availments, 1161.18 (3); 1161.18 (4); 1161.18 (5); 1161.18 (6) definitions, 1161.18(1) reports on volumes and interest rates App. 47 transactions, 1161.18(2) Single Borrower's Loan Limit (SBL) additional loan limit, 1301 basic loan limit, 1301 contingent liabilities included, 1301.3 exclusions, in general, 1301.1 exclusion of committed credit line, 1348.5 exclusion of holdings of CP selling agent, 1293.1.h for fund management accounts, 1424 for trust loans, 1409(a) loans rediscounted with CB, 1301.1 interbank deposits, 1301 Sinking Fund for bond issues, 1297.4.d Small Producer definition for purpose of Cooperative Finance System, 1355.1.a Small-Scale Industry IGLF loans to, 1351.2(d) (5) list for IGLF financing, app. 27 equity investment of VCC in, 1384.2 Social Security System (SSS) commercial banks as collecting agent of, 1604.1 Solicitation of Deposits Barangay Savings Movement, 1215.2 grant of authority, requirements, 1215 TIPID Movement, 1215.1; App. 11(V) Special Financing Program (See individual captions) Agricultural Guarantee Fund Area Marketing Cooperative (AMC) Aromatic Tobacco Trading Loan Fund (ATTLF) Cooperative Finance System Copper Stabilization Fund Program Stock/Stockholders citizenship requirement for quasi-banking function, 1289.4 convertibility of preferred to common, 1126.3 definition for purpose of DOSRI rules, 1326.1.c foreigner's stockholdings, 1126.2 limits on shareholdings in single bank, 1131.1 in several banks, 1131.2 prior Monetary Board approval, 1126.1(c) real estate transaction between bank and DOSRI, 1161.5 report on list of stockholders and their stockholdings, 1161.9; 1126.1(c) transfers, 1126.1 Stockholdings in Banks foreign equity, 1126.2 Subsidiaries of Domestic Banks consolidation of reports with subsidiary/affiliate, 1161.13 definition for purpose of consolidated financial statements, 1161.13.a(5) for purpose of bond issues, 1297.1.e for purpose of SEC registration, App. 19 minority interest in subsidiary, 1161.13.c purchase of receivables from, 1288 reports required of foreign, 1161.14 Supervised Credit concept of system, 1345.b definition, 1345.1 requirements for crop insurance, 1345.1 a CB-trained technician, 1345.d steps in lending under, 1345.c Surplus reserve for trust operation, 1413 Swap CBCIs and other government securities under CB open-market operations, 1389(h) suspension of dollar-peso privilege, 1106.5.c Tax/Taxes rediscounting of tax credit certificates of exporters, 1273.8 withholding on deposit substitutes, 1292 withholding on interests on government securities, 1604.2 Tax Collection Agency collection and reporting procedure for customs duties, 1602.3 for export premium/duties, 1602.5 for import processing fees, 1602.4 for internal revenue taxes, 1602.2 interest charges on collections, 1602.11 penalty for wilful delay in reporting remittance, 1602.8; 1602.10 policy formulating body, 1602.9 qualified banks, 1602.1 reconciliation of revenue collections, 1602.7 remittance thru debit/credit advices, 1602.6 Technician for supervised credit, 1345(d) Teller's Window definition for purpose of bank protection, 1167.2(c) Temporary Overdrawings (TODs) prohibition on, 1204.1 past due, 1304.1 Time Deposits interests on, 1231; 1244 (See also Interest ) matured time deposits, 1244.2 pretermination of, 1244.3 reserves against, 1232 size, 1233 special time deposits, 1234 term, 1233 TIPID Movement exemption from rules on distribution of gifts/giveaways, 1261.2 revised TIPID Movement Manual, App. 11 solicitation of deposits under the, 1215.1 Tobacco Financing Aromatic Tobacco Trading Loan Fund, 1356 Virginia and Burley Tobacco Financing, 1356.9 Total Assets definition for purpose of net worth-to-risk assets ratio, 1116.4.d Trade-in definition for purpose of the Truth in Lending Act, 1305.2(e) Transfer Ticket interbank loan, 1343.1 sample forms loan advice, App. 23 loan repayment, App. 23 call loans, twenty-four hours, 1343.4 Treasury Bills clearing operations for, 1603.1 proceeds as demand deposits, 1601.3(b) qualification for sales agency, 1601.3(a) withdrawal by CB, 1601.3(c) Treasury Warrants clearing of, 1603.3 Trust Account definition, 1402.1(d) NFA/ACA accounts, 1415.4 Trust Business definition, 1402.1(a) Trust Certificate as a deposit substitute instrument, 1281.1 Trust Committee responsibilities of, 1407.3 Trust Funds definition, 1239.2(b) investment under the Cooperative Finance System, 1355.3(c) under the KKK Program, 1280 Trust Indenture for bonds. 1297.4(a)(d) Trust Loans limitations on, 1409 Trust Officer qualifications, 1407.2 responsibilities, 1407.3 Trust Operations audit of trust operations, 1415.3 ceilings on trust loans, 1409 common trust fund (see separate caption) disposition of assets received, 1410 directed investments, 1424; 1408; 1410 discretionary investment, 1410 fees and commissions, 1412 government fund placed under, 1410 limitations on loans and investments on trust funds, 1410 mergers/consolidations of financial institutions engaged in, 1406 non-trust agreements, 1405 time deposit privileges for, 1415.6 pre-requisites for engaging in business of, 1403 required surplus for trust corporation, 1413 requirement for separation of accounts, 1411 reports on, 1415.1; 1415.2 responsibilities of administration of, 1407 security for faithful performance of duties, 1404 transactions requiring prior authority, 1408 trust operations, defined, 1402.1.a Truth in Lending Act disclosure requirement of, 1305 format of abstract, App. 22 implementing offices, 1305.7 sanctions for violations of rules, 1305.8 Unclaimed balances , 1264 Underwriting Exposure , 1382 Underwritten Securities 1424 Uniform System of Accounts adoption of, 1161 Unimpaired Capital and Surplus definition for purpose of single borrower's loan limit. 1301.2.c Unsecured Loans ceiling on unsecured DOSRI loan, 1331 collateral requirement, when needed, 1319.5 definition for purpose of DOSRI rules, 1326(i) financial capacity, proofs of, 1319.2 maximum amount, 1319.3 sanctions for violation of rules on, 1319.6 signatories to, 1319.4 unsecured loans under Masagana 99 and Masaganang Maisan, 1273.3(d) Valuation Reserves allowance for uncollected interest on loans, 1303.5(d) for doubtful and loss accounts under the Masagana 99 Program, 1352.5 Venture Capital Corporation (VCC) authority to invest in, 1384.1(a) business name, 1384.3 equity investments by, 1384.2 examination of, 1384.4 interlock between bank and, 1384.5 limit on investments in, 1384.1(b), (e), (f) loan limit to, 1384.1(d) paid-in capital of, 1384.1(c) reportorial requirements, 1384.4 Violation, persistent definition for purpose of rules on money market placements of RBs, 1287.1(c) Voting Trust declared unlawful and void ab initio, 1126.1.c Withdrawals booking of, 1263 thru withdrawal authority slip, 1216 Without/Recourse Transaction prohibited practices, 1290.1 rural banks may not participate in, 1287 when not considered quasi-banking transaction. 1289.3 Write-Off of loans as bad debts, 1304.7 Yield ceiling on purchase of receivables, 1388.1 (See also Interest )